BREDS IV Residential Holdco is sponsoring its first rated and seasoned mortgage-based securities (MBS) deal collateralized by performing and re-performing loans, issuing the notes through the BINOM Securitization Trust 2022-RPL1.
BINOM Securitization Trust will issue $310,070 in MBS, according to DBRS Morningstar, which is expected to assign ratings to the notes. The notes are backed by 1,887 loans.
For this transaction, DBRS explained, the mortgage loans have about 176 months worth of seasoning. As of the cut-off date, January 1, 94.1% of the pool is current and 5.9% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquent method.
The sponsor, owned by the private equity fund Blackstone Real Estate Debt Strategies and a majority-owned affiliate of BREDS IV Residential Holdco, will retain a 5% eligible vertical residual interest consisting of at least 5% of each class of notes other than the Class R notes, in accordance with Dodd-Frank Act risk retention requirements.
Ratings on the notes range from ‘AAA’ on the $211 senior class A notes to ‘B’ on the $7.4 million, subordinate class B2 notes. Ratings on the three mezzanine classes range from ‘AA’ on class M1 to ‘BBB’ on class M3.
Among the deal’s strengths, the underlying collateral’s weighted average (WA) current combined loan-to-value ratio is 65.2%, the rating agency said.
Third parties performed due diligence on various aspects of portfolio, including regulatory compliance, modification, payment history, and servicing cash flow.
Also, all loans in the pool are seasoned more than 24 months and have been outstanding for more than 14 years. DBRS opines that the loans comprise borrowers who have demonstrated a willingness to stay in their homes throughout various economic cycles.
BINOM Securitization Trust is not without its challenges, however. It employs a representations and warranties framework that DBRS Morningstar finds acceptable, but a number of weaknesses abound. For one, there is an optional review trigger, and the representations and warranties provider is unrated.
Virtually all of the loans in the pool, 97.1%, are financed with fixed-rate products and about 91.4% of the origination balances are on primary residences. Another 1.7% are on second homes, and 6.9% are investor-owned properties, according to DBRS. The average loan balance in the pool is $164,319. On a WA basis, the coupon is 4.3% and the FICO score is 670.
