A&D Mortgage recently closed a $304 million residential mortgage-backed securitization (RMBS) that pools 872 newly originated loans that the issuer says reflect the evolving needs of market participants.
The transaction is split into nine rated tranches and an unrated piece. The ASR database shows the bonds rated AAA through BBB- by S&P Global Ratings pricing at or below the low end of guidance, with the $180.4 million, AAA piece pricing at 130 basis points over the three-month I-curve, compared to guidance of 135 bps. KBRA also rated the transaction, giving most of the tranches ratings at a notch or two above S&P's, according to the database.
Atlas SP Securities acted as structuring lead on the widely syndicated offering, and Barclays Capital, BMO Capital Markets, BNP Paribas Securities, Jefferies, Mizuho Securities, and Nomura Securities International were co-leads.
KBRA's pre-sale report described the collateral's leverage as moderate and the equity sufficient to provide a margin of safety against potential home price declines. However, the rating agency said, the deal's concentration of mortgages secured by investment properties is "meaningful," at 45.3%, with 35.4% of the mortgages underwritten based on debt service coverage ratios (DSCRs).
A&D Mortgages says the securitization leverages a diverse portfolio of loans, with nearly 88% originated using alternative income documentation such as bank statements, profit and loss statements, and DSCRs. The firm adds that the transaction is supported by robust credit enhancements, including excess spread, subordination, and a hybrid, pro-rata/sequential payment structure designed to protect senior certificate holders. Approximately 35.2% of the loans are designed as non-QM, extended to self-employed individuals, investors, and borrowers with unique financial circumstances.
"The pool reflects the evolving needs of self-employed individuals, investors, and borrowers with unique financial circumstances," according to a statement from A&D Mortgage.
The mortgage lender completed a $368 million RMBS in October.
"Together, these transactions illustrate the robust demand for non-QM lending products and reinforce A&D Mortgage's leadership in this specialized market segment," A&D Mortgage said in a statement.
