American International Group is preparing its offering of residential mortgage bonds through its own issuance shelf, according to rating agency presale reports.
The global reinsurer has previously issued two private-label mortgage securitizations under Credit Suisse’s CSMC platform. The new transaction, Pearl Street Mortgage Company 2018-1 Trust, is backed by 726 prime jumbo loans with a total balance of approximately $446.17 million that subsidiaries of AIG acquired from various mortgage originators.
All of the loans have 30-year terms, pay fixed rates of interest, are fully amortizing and made to borrowers with strong credit profiles, relatively low leverage and large liquid reserves. The loans are seasoned an average of five months.
The pool has a weighted average (WA) original FICO score of 774, which is in line with, or higher than, that of recent prime transactions rated by Fitch — including the most recent Credit Suisse transaction (775). Approximately 48% of the borrowers have original FICO scores at or above 780. In addition, the original WA cumulative loan-to-value ratio of 73.6% represents substantial borrower equity in the property and reduced default probability, Fitch Ratings said in its presale report.
Approximately 34.3% of the pool is located in California, which is in line or slightly lower than other recent Fitch-rated transactions.
In addition, the Metropolitan Statistical Area concentration is minimal, as the top three MSAs account for only 24.6% of the pool. The largest MSA concentration is in the San Francisco MSA (10.5%) followed by the Seattle MSA (7.5%) and the Atlanta MSA (6.6%). As a result, Fitch did not apply a geographic concentration penalty in its analysis of the deal.
Two independent third-party review firms performed full-scope due diligence (credit, compliance, valuation and data verification) on 100% of the pool. "The loan file review generally illustrated a sound underwriting and loan purchase platform, with exceptions or waivers generally granted based on adequate compensating factors," Kroll stated in its presale report.
The loans will be serviced by Cenlar and Wells Fargo Bank will act as master servicer.
Both Fitch and Kroll Bond Rating Agency expect to assign AAA ratings to the senior tranches of notes to be issued in the transaction, which benefit from 15% credit enhancement, as well as to a tranche that benefits from 7.5% credit enhancement.
AIG Investments, an investment advisory firm that is an indirect subsidiary of AIG, has been acquiring newly originated prime jumbo loans through various funds since 2013. To date, the funds have been holding all purchased loans in their respective portfolios; however, AIG Investments plans to grow the aggregation platform through regular securitization, according to Fitch.