Securitization

New Residential, the REIT, boosts credit confidence in the deal as a sponsor and originator experienced with re-performing and seasoned cleanup calls.

Lenders financed the properties through first-lien, fixed-rate mortgage loans, most of which were on 30-year terms extended to prime borrowers, many self-employed.

Anticipation of the Federal Reserve’s balance-sheet reduction is weighing on bonds backed by mortgages, but the actual event may make them an attractive alternative to corporate debt.

Only about 1.0% of the mortgage assets in the collateral pool are for the respective borrowers’ personal use, and qualify as mortgages under Regulation Z.

Solar loans with balances of $5,000-$125,000, and Home Efficiency Loans, which have balances ranging from $1,000-$100,000, make up the bulk of the asset pool.

Secured by a single Morgan Stanley first-lien mortgage, the SFR is the largest deal since the program priced its $2 billion transaction in July 2021.

By property type, lodging assets led the way for total delinquencies, with 6.3%, while some 3.5% of the lodging pools were current and specially serviced.

Homes securing the portfolio produce an average monthly rent of $2,405, based on gross potential rent for vacant properties, and an average remaining lease term of eight months.

Securitization would have to see more cycles before the full effect of the COVID-19 pandemic becomes apparent, but loans backing multi-borrower SFRs show more sensitivity to rent collection disruptions.

Non-QM assets overlap almost perfectly with the portion of loans, 52%, financing properties where the borrower intends to maintain as a primary residence.