Ajax Mortgage Loan Trust 2023-C (AJAX 2023-C) is issuing notes totaling $203.6 million backed by a portfolio of seasoned performing, reperforming and nonperforming first-lien residential mortgages. The U.S. pool contained 1,171 loans with a total principal balance of $203.81 million as of May 31, according to DBRS Morningstar.
The mortgage loans are approximately 196 months seasoned and include 88.8% modified loans, DBRS says. The modifications happened over two years ago for 83.0% of the modified loans. The borrowers have demonstrated reasonable cash flow velocity (number of payments over time) in the past six, 12 and 24 months, DBRS says.
The seller is Great Ajax Operating Partnership, the underwriter is Nomura Securities International, and the servicer is Gregory Funding. The weighted average coupon is 4.693%, the closing date is July 24, and the final maturity date is May 2063.
Before AJAX 2023-C, Ajax and its affiliates issued 46 securitizations under the Ajax Mortgage Loan Trust shelf since 2013, DBRS said. The rating agency did not rate most of these securitizations, and it says the unrated deals have relatively high levels of delinquencies and losses compared with the rated Ajax securitizations.
The notes have senior/subordinate enhancement. To satisfy the credit risk retention requirements, the sponsor or a majority-owned affiliate of the sponsor will retain at least a 5% eligible vertical interest in the securities.
Transactional strengths include low loan-to-value ratios, satisfactory third-party due-diligence review, seasoning and structural features, DBRS said.
The number of loans and the pool balance in AJAX 2023-C are similar to February 2023's AJAX 2023-A deal. But the percentage of deferred principal balances has gone up from 3% to 7.2%, and the weighted average FICO score of 626 is down from 652 in AJAX 2023-A.
The issue's challenges include delinquencies, DBRS says. Of the loans in the pool, 21.1% are 30-59 days delinquent and 15.8% are 60+ days delinquent. Mitigating factors include a very low DBRS-calculated current combined loan to value (CLTV) of 60.2%, which is up from 53.5% in AJAX 2023-A. In the event that a borrower defaults and a loan is liquidated, such low LTVs result in more favorable recoveries, thus mitigating potential losses, DBRS says.
DBRS points out an uncommon feature of the notes. Their interest rates are set at fixed rates, which are not capped by the net weighted-average coupon (net WAC) or available funds. This feature causes the structure to need elevated subordination levels relative to a comparable structure with fixed-capped interest rates because more principal must be used to cover interest shortfalls.
DBRS has provisionally rated the class A-1 notes at AAA, class A-2 at AA, class A-3 at A, class M-1 at BBB, and class M-2 at BB. It didn't rate the class C certificates.
The AAA rating on the notes reflects 33.35% of credit enhancement provided by subordinated certificates, DBRS says. The AA, A, BBB and BB ratings reflect 29.60%, 27.60%, 25.85% and 15% of credit enhancement, respectively, it says.
