Loan Funding Structure III is sponsoring a residential mortgage-backed notes (RMBS) securitization deal, but analysts note that fundamentals are not keeping pace with the home price values on the pool of seasoned performing and re-performing mortgages.
The BRAVO Residential Funding Trust, 2022-RPL1, is expected to issue $414.2 million in RMBS in a deal that is slated to close on January 28, according to a presale report from Fitch Ratings.
Citigroup Global Markets is lead underwriter on the transaction.
Collateral consists of 2,233 seasoned performing loans and re-performing loans. Non-interest bearing deferred principal amounts account for about $44.2 million, or 10.7% of the aggregate pool. Among the deal’s key ratings drivers is Fitch’s view that home prices on the pool are at 10.7% above a long-term sustainable level, versus a national level of 10.6%. The rating agency pointed to a supply/demand imbalance, driven by low inventory, low mortgage rates and new buyers entering the market.
Fitch expects to assign ratings ranging from ‘AAA’ on the $272.3 million class A-1 notes to ‘B’ on the $12 million class B-2 notes.
Aside from the performing/re-performing status of the underlying mortgages, the collateral pool is mixed in other respects, according to Fitch. There are fixed-rate, adjustable-rate and step-rate loans in the pool, as well as fully-amortizing balloon and interest-only mortgages.
The pool contains 2.05% adjustable rate mortgages priced at various spreads over one, three-, six- and 12-month U.S. dollar Libor benchmarks, Fitch said. No hedges or notes have Libor exposure, however, Fitch said.
Most of the loans are first-liens on primarily one-to four-family residential properties, condominiums, townhouses, manufactured homes and unimproved land. In aggregate, the mortgages have 189 months of seasoning. About 90.1% of the pool is current, while 9.98% are delinquent.
On a weighted average basis, the mortgages have:
• an original cumulative LTV of 82.9%
• a month-to-month CLTV of 68.7%
• a model FICO score of 646
• an original debt-to-income ration of 43.2%
• a current coupon of 3.9%
• an original term of 554 months
Single-family residences make up the substantial majority of the pool (85.5%), while the rest of the pool includes condominiums (4.1%), and multifamily (6.2%).
The pool is very geographically diverse, with California accounting for the largest concentration, 13.2%, followed by New York, with 16.0% of the collateral.
