MBS

The Department of Housing and Urban Development agency warned in an online notice that issuers with prepayments exceeding certain limits could face sanctions.

The inclusion of reclassified HECMs was seen as a potential credit shortcoming, as a small number had exceptions that are potentially meaningful, such as an expired or unapproved appraisal.

The structure calls for the trust to reallocate principal so that interest is paid on the AAA through AA rated notes before other principal distributions.

The mortgages have an average balance of $70,312, and an average coupon, on a weighted average (WA) basis, of 10.06%. Also on a WA basis, the borrowers have an original credit score of 739.

The deal will repay investors sequentially and through a shifting interest payment structure, according to ratings analysts from Moody's Investors Service. On a weighted average (WA) basis, the rating agency notes, the mortgages have a FICO score of 773.

Banks have been boosting purchases of top-rated CLOs. Commercial bank holdings of mortgage bonds are also on the upswing, climbing 12 of the last 15 weeks.

Flat growth is expected for mortgages and auto loans, while credit card loan growth will slow down.

Loan criteria such as credit scores, loan types and loan-to-value ratios are all weaker than those included in 2022 deals, Fitch said.

Mortgage-backed securities' strong showing since mid-October defies a textbook theory that they typically underperform other types of bonds when yields are falling.

BANK5 stands out from most standard conduit transactions, which have included mostly 10-year term loans. Fitch's historical loan performance analysis, finds five-year loans show a lower probability of default, comparatively.