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.

Company management believes it can still be successful in the securitization market despite widening spreads.

A majority of the loans, 63.5%, were designated as non-QM loans, and about 36.5% of the loans in the pool are made to investors for business purposes.

About 30% of U.S. office buildings are at high risk of becoming obsolete as tenants’ tastes change in the hybrid-work era.

Self-employed borrowers accounted for 29.8% of the pool, while loans with co-borrowers and multiple borrowers accounted for 39.9% and 9.8%, respectively.

The current program, which included more than 580 separate operations to buy Treasuries and 1,200 to purchase mortgage-backed securities, has dwarfed all three of the Fed’s previous quantitative-easing programs combined.

Last year’s issuance of securitizations for these non-conforming mortgages was the most since 2007.

A nearly $1.9 billion commercial mortgage bond linked to a portfolio of office buildings owned by Columbia Property Trust Inc. and Allianz SE was delayed on Wednesday due to market weakness, according to two bond investors.

A&D Mortgage originated a vast majority of the pool, 96.7%, and the company plays a number of other roles on the film, such as servicer and provider of the R&W.

“This puts the performance of inflation solidly back into the limelight” with the “risk that higher prices with the backdrop of heightened geopolitical uncertainty will ultimately be stagflationary.”

Athas Capital Group originated the mortgages, which have an average balance of $408,350, and an average weighted average (WA) original term of 362 months.