Non-qualified mortgage assets will secure $435.4 million in residential mortgage-backed securities (RMBS) coming to market from the A&D Mortgage Trust, 2025-NQM4.
A&D Mortgage originated all the 1,296 loans in the collateral pool, and almost all the home loans were newly originated, according to Kroll Bond Rating Agency. Borrowers have a non-zero weighted average original credit score of 744, and their loans have a weighted average original loan-to-value ratio of 66.4%, KBRA said.
The pool is overwhelmingly comprised of fixed-rate mortgages, 99.6%, and just 2.5% of the pool has an initial interest-only period, KBRA said.
A&D will sell notes through about 11 tranches, and repay investors through a combined pro-rata and sequential structure, according to the deal's capital structure.
Subordination confers credit enhancements to the senior notes in the structure, according to KBRA. Also, excess spread, subject to delinquencies and fees that reduce the effective collateral net weighted average coupon (WAC) helps maintain liquidity to the notes, according to the rating agency.
The structure also prohibits any interest from being advanced on loans that are more than 90 days delinquent. If loans are stopped principal and interest advances are deemed to a stop advance mortgage loan. If the servicer, TKTK, fails to make a required P&I advance, the master servicer will have to make P&I advances with respect to any mortgage loan that is not a stop advance mortgage.
The deal is scheduled to close on September 30, and notes have a final maturity of October 2070, according to KBRA.
J.P. Morgan Securities is the structuring lead, and tops a lengthy list of initial purchasers and joint bookrunners that includes ATLAS SP Securities, Barclays Capital, BMO Capital Markets and Guggenheim Securities, the rating agency said.
On average, the loans have a balance of $335,965, and an original FICO score of 744.
A large majority of the mortgage pool, 86.2%, was underwritten using alternative documentation, including debt service coverage ratio (DSCR), bank statements and W2 statements.
KBRA assigns ratings of AAA to all the A1 notes; AA+ to the A2 notes; A= to the A3 tranche; BBB to the M1 notes; BB+ to the B1 tranche; and B to the B2 tranche.
S&P Global Ratings assigns AAA to all the A1 notes; AA- to the A2 notes; A- to the A3 notes; M1 to the BBB- notes; BB to the B1 notes; and B- to the B2 notes.
