BRAVO Residential Funding Trust 2023-NQM1 is turning to the capital markets to raise at least $365.4 million in mortgage-backed securities. A pool of mortgages largely underwritten with less than full documentation will secure the issued notes.
While 91% of the collateral loans were underwritten to less than full documentation, 49% of them were underwritten to a 12- or 24-month bank statement program verifying the borrowers' income, according to Fitch Ratings, which plans to assign ratings to the notes.
The underlying mortgages for this transaction, called the BRAVO 2023-NQM1, are almost evenly split between funding owner-occupied properties (53%) and second homes or investor properties (47%). Among other mortgage characteristics, 57.3% of them are designated as non-QM loans, while 42% are exempt from the Ability to Repay Rule (ATR), Fitch said.
As of the cutoff date, virtually all of the loans in the pool seemed to be performing, with just 1.6% of them being 30 days delinquent. Some 3.7% are considered current, although they have experienced a delinquency previously, or had missing pay strong data within the past 25 months, the rating agency said.
Barclays is the lead underwriter. BRAVO Residential Funding 2023-NQM1 will distribute principal through a modified sequential payment structure, where it will distribute principal pro rata among the senior notes. The subordinate bonds will be shut out of payments until all of the senior classes are reduced to zero, according to Fitch.
The rating agency noted several drawbacks to the deal from a credit standpoint. For one, the BRAVO 2023-NQM1 has a debt service coverage ratio (33.1%) that is higher than previous transactions.
"This increased concentration is driving the loss expectations for this pool higher than prior deals due to an expected loss on the DSCR portion at Fitch's 'AAAsf' rating stress higher than 30%," Fitch said.
The rating agency also took issue with the high geographic concentration of the underlying loans, as California accounts for 48.4% of the loans in the pool.
Fitch plans to assign ratings of 'AAA' to the class A-1 notes; 'AA' to the A-2 notes and 'A' to the A-3 notes. As for the subordinate classes, the M-1 through B-2 are slated to receive 'BBB' through 'B' ratings.
BRAVO 2023-NQM1 seeks to raise at least $365.4 million
