Two Harbors is marketing a $374 million offering of residential mortgage bonds, the second via its Agate Bay Mortgage Trust, according to a presale report published by DBRS.

The transaction, ABMT 2014-2, is backed by a portfolio of 543 jumbo prime residential mortgages acquired by Two Harbors via a direct loan acquisition program. In line with most post-crisis RMBS deals, the pool is comprised of 30-year year, fixed-rate mortgages. None of the loans have interest-only features. Loans that amortize generally pose the lowest default risk.

ABMT 2014-2's collateral is relatively concentrated geographically, with California representing 43.1% of the pool and the top three states representing 62.7%. The loans have an average size of $689,393.

The pool has a weighted-average loan-to-value ratio of 70.5% and a weighted average FICO score of 766. These metrics indicate that borrowers have considerable equity in their homes and a strong credit profiles.

Most of the loans included in the pool are designated as "qualified mortgages" under the “ability to repay” requirements adopted as part of  the Dodd-Frank Wall Street Reform and Consumer Protection Act. The QM designation provides a safe harbor for issuers from liability for violating ATR requirements.  

The 1.4% of the the pool that are non-QM loans are not subject to the rule because they were originated before it took effect. 

DBRS has a assigned preliminary 'AAA' rating to the class A notes, 'AA' to the class B1 notes, 'A' to the class B2 notes, 'BBB' to the class B3 notes and 'BB' to the class B4 notes.

In July, the issuer placed its 2014-1 transcation—the $267.67 million Agate Bay Mortgage Trust 2014-1. Only 51.8% of that pool were QM loans, with the other 48.2% not subject to QM.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.