Sutton Funding, an affiliate of Barclays Capital, is preparing to sponsor a $254.3 million sale of non-prime, mostly fixed-rate residential mortgage-backed securities (RMBS) to investors.
Scheduled for a closing at the end of June, the deal will sell notes through a structure of class A, M and B notes, plus pass-through exchangeable notes, according to Kroll Bond Rating Agency, which rated the deal. Known as Barclays Mortgage Loan Trust, 2025-NQM2, the deal has a legal final maturity of May 2065, KBRA said.
Barclays Capital is also the deal manager, according to Asset Securitization Report's deal database.
Three senior notes, A1, A2 and A3 are fixed-rate and will pay on a pro-rata basis. Rated AAA, AA+ and A, the A1, A2 and A3 notes benefit from credit enhancement levels of 28.65%, 23.00% and 11.90%, respectively. Credit enhancement to the mezzanine notes represent 5.00% of the notes' balance.
After the mezzanine level, the notes will repay investors sequentially, which confers subordination to the notes as one layer of credit enhancement, KBRA said. The notes also benefit from excess spread of 1.7%.
The 591 mortgages in the collateral pool are not prime, and a vast majority of them, 87.3% were underwritten using alternative documentation, KBRA said. There is also a significant portion of mortgages secured by investment properties, 44%, and overall 47.5% of the collateral pool is composed of non-qualified mortgages.
Yet borrowers are affluent, with a non-zero weighted average (WA) annual income of $1 million, and liquid reserves of $650,247.
Yet the loan servicing companies, which include Selene Finance, Citadel Servicing Corp., and Rocket Mortgage, are all experienced, which KBRA view favorably. Also Nationstar Mortgage is on the deal as master servicer, another positive credit characteristic.
On average, the loans, about 95% of which are first-lien, have a balance of $430,312. They have original terms of 355 months, and coupons of 7.79%, on a weighted average basis. Borrowers' original WA FICO score is 744, while the securitized pool's KScore from KBRA is slightly lower, at 739, the rating agency said.
KBRA assigned BBB, BB and B to the M1, B1 and B2 tranches, respectively.
