Real estate investment trust Annaly Capital Management is planning to issue another offering of residential mortgage bonds from its Onslow Bay platform.

The new transaction, OBX 2018-1 Trust, is backed by a pool of 920 high-quality prime loans totaling approximately $326.55 million, according to a presale report published by Fitch Ratings. Approximately 63% of the pool comprises collateral acquired from two called Bear Stearns transactions initially issued in 2005 and will be serviced by Wells Fargo Home Mortgage. The remaining 37.3% of the pool consists of mortgage loans acquired by Annaly in the whole-loan market and will be serviced by SLS. Wells Fargo Bank will act as master servicer for the transaction.

Onslow Bay completed its first securitization in December 2015, which was the first deal since the financial crisis composed of newly originated jumbo adjustable-rate mortgages, according to information posted on the company’s website. The new deal will be its second rated securitization, according to Fitch.

Fitch’s expected loss levels for the new transaction are similar to those of recently issued prime transactions, the presale report states. However, the OBX 2018-1 transaction has a weaker FICO profile, product type composition and includes loans that have previously been delinquent. These relatively weaker features are offset by the seasoning and large amounts of borrower equity.

Loan-level due diligence review was conducted on approximately 62% of the pool in accordance with Fitch’s criteria for seasoned performing loans. The review generally indicated low operational risk, although approximately 9% of the reviewed loans in the pool received a ‘C’ or ‘D’ grade, meaning they had material violations or lacked documentation to confirm regulatory compliance.

OBX 2018-1 utilizes a traditional senior-subordinate, shifting-interest structure similar to most recently issued Fitch-rated prime transactions.

Class A-2 is the super senior class, and class A-3 is the senior support class, whereby losses allocable to the senior classes are first absorbed by class A-3 until reduced to zero. The classes A2-IO, A3-IO, B1-IO, B2-IO and B3-IO will receive interest only.

The B-1 through B-6 classes are subordinated to the senior classes. All senior and subordinate classes will receive their pro rata share of scheduled principal. Unscheduled principal will be distributed among the senior classes until the distribution date in April 2023, subject to the step-down tests.

Annaly is the largest mortgage REIT in the U.S., managing over $101 billion in assets and approximately $15 billion in capital.

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