Securitization

CDFI-originated loans are not required to comply with the Ability to Repay (ATR) rules, but the mortgages included were generally made to creditworthy borrowers.

Despite a slowing in the private-label securitization market in January, lenders and investors are expecting a strong year for outside-the-box originations and their secondary market sales.

About 58.1% of the loans are in California, while two California cities -- Los Angeles and San Diego -- make up the pool’s largest MSA concentrations.

Monday’s rebound in yields also kicked in a resumption of curve flattening with the gap between 2- and 10-year yield falling almost 4 basis points to about 40.5 basis points.

About 3.3% of loans in the deal fall into the 600-649 FICO bucket on the current Sunnova Helios VIII, 2022-A, compared with a 1.2% level in the 2021-C deal.

The sponsor, owned by Blackstone Real Estate Debt Strategies and a majority-owned affiliate of BREDS IV Residential Holdco, will retain a residual interest.

If the minimum CE test or the delinquency test is not satisfied, then 100% of the scheduled and unscheduled principal will be allocated to the senior tranche.

Performing and re-performing loans are in the pool, as well as fixed, adjustable-rate and step-rate loans, and fully-amortizing balloon and interest-only mortgages.

Collateral characteristics are slightly weaker than previous deals, due to a higher proportion of loans underwritten to alternative income documentation.

Office properties account for 60.8% of the pool, above the 41.2% average for 2020 deals, and above the 36.5% average for 2021.

Treasury dealers and investors are busy trying to predict exactly when the Federal Reserve might pull the trigger on cutting the size of its balance sheet and how big that drawdown could be when it does.

In addition to being almost entirely composed of investment-purpose mortgages, about 100% of the pool’s 2,175 mortgages are agency eligible.

The SEC claims Morningstar put investors at a risk when rating $30 billion in CMBS deals from 2015-2016. Morningstar defends its integrity and independence.

The selloff worsened after minutes from the Federal Reserve’s latest meeting showed officials considering earlier and faster interest-rate increases than expected.

Treasury yields rose a second day amid increasing conviction that the Federal Reserve will raise rates at least three times beginning in May.

Even among the non-QM loans in the reference pool, pegged to the SOFR, most of their characteristics fall in line with what is considered prime.

Debt issued by states to finance low-interest loans for first-time home-buyers or build affordable housing carry higher yields and are less volatile, so they typically perform better than other muni sectors when rates rise, said Peter DeGroot, head of municipal research and strategy at the biggest U.S. bank.

ABS experts discussed new avenues for growth, and hindrances to innovation at the IMN ABS East conference in Miami.

Key retail vacancies, a drop in office occupancies, plus a combination of lower oil prices, a housing market oversupply — worsened by the coronavirus pandemic — caused loan-level performance issues.

The Morgan Mortgage Trust platform has had a SOFR tranche on every previous 2021 deal, generally pricing with a spread of about 95 basis points over SOFR.