RMBS

The deal mitigates mortgage-pool risk with CLO credit strengths

Unlike some recent RMBS deals, both exclude riskier interest-only loans and those supporting investment properties.

Legacy RMBS structured to withstand challenging mortgage market

Top banks are underwriting the deal, but most of the securitization's loans lack documentation.

Aggregator counters the risk of loans' low starting rate with a strong borrower profile.

The new deal will increase the sponsor's 2024 issuance to more than $3 billion.

The second-lien loans face low recovery post-default, especially if home prices drop.

More than 90% of the loans were underwritten without full documentation, raising default probability.

Underwriting methods have been steadily shifting to traditional full documentation, which accounts for 13.3% in the VERUS 2024-9, KBRA said, its largest share since VERUS 2024-6.