MBS

The companies have been under government conservatorship since the 2008 financial crisis. Fannie and Freddie have both returned to steady profitability.

The funding round will help Button Finance, which leverages AI to underwrite home equity financing, expand its range of products to more borrowers.

A range of investment residential properties, including single-family homes, condominiums and multi-unit properties, will secure the debt.

Moderate leverage is one example of cleaner credit, as the current collateral pool's original loan-to-value (LTV) ratio is 69.1%, down from 71.7% on the 2024-NQM1 series.

Originators applied bank statement, full documentation and profit and loss documentation in their underwriting.

The deal is composed of 11,547 seasoned performing and reperforming loans that are first and second lien. Loan servicing includes a 180-day chargeoff feature.

Second-lien loans make up virtually the entire pool, which carries some risk of poor recovery rates. Yet 78% of the pool is also considered safe-harbor mortgages.

Now the structured mortgage securities are cheap enough that CLO investors are watching them more closely, according to strategists and investors.

Excess cash flow will pay timely interest and protect against realized losses in the rated certificates before being paid out to the class X notes.

Small-balance commercial mortgages, SBA 504 and investor loans, all first-lien, make up the collateral pool.