BRAVO Residential Funding Trust 2023-NQM4 is preparing to issue $294.8 million in residential mortgage-backed securities (RMBS), using a modified sequential structure to repay investors.
Loan Funding Structure is sponsoring the transaction, known as BRAVO 2023-NQM4, which will repay investors through a modified sequential payment structure, according to Fitch Ratings. The trust will distribute principal on a pro rata basis among the senior notes while shutting out the subordinate bonds from any principal until all of the senior classes are reduced to zero.
Goldman Sachs is serving as lead underwriter on the deal, which also has a step-up coupon for the senior classes. After four years, the senior classes pay the lesser amount of a 100 basis-point increase to the fixed coupon, or the net weighted average coupon (WAC) rate, said Fitch, which intends to assign ratings to the notes.
BRAVO is expected to close on June 30, according to the Asset Securitization Report's deal database, when the 'AAA' notes is expected to price at 180 basis points over the three-month Interpolated Yield Curve, according to the database. Guidance on the 'BBB' notes are at 350 basis points over the same benchmark.
ClearEdge Lending originated 26.3% of the 653 loans in the pool, making it the largest contributor in a pool of majority non-qualified mortgages. Only 5.9% of the loans in the pool were underwritten to full documentation standards. Meanwhile bank statement documentation, which relied on 12- or 24-month bank statements to verify income, accounts for the majority of loans in the pool, at 56.6%. Fitch pointed out a key distinction between this pool and legacy Alt-A loans, which is that the loans adhere to underwriting and documentation standards required under the Consumer Financial Protections Bureau's (CFPB)'s Ability to Repay/Qualified Mortgage Rule (ATR).
Clean current loans represent 97.0% of the pool, where borrowers have a moderate credit profile. Obligors have a 730 model FICO score, and a 43% debt-to-income (DTI) ratio. Of the pool, 56% of loans are treated as owner-occupied, while 44% are treated as investor properties or second homes. Loans with a cashout feature account for 25.0% of the pool, according to Fitch.
Fitch expects to place ratings on six of the notes, with 'AAA' on the class A-1 notes; 'AA' on class A-2; 'A' on class A03; 'BBB' on class M-1; 'BB' on the B-1 notes and 'B' on the B-2 notes. All of the notes are expected to have a legal final maturity date of May 2063.
