A pool of 796 non-qualified mortgages will secure $368.7 million in mortgage-backed securities from the BRAVO Residential Finding Trust, 2025-NQM2, amid home price values that Fitch Ratings says is above a sustainable level.
The deal is slated to close by February 28, selling the notes through about nine tranches of notes, and they have a stable outlook despite the elevated home values, Fitch said. All the notes have a stated final maturity date of November 2064.
The A1A class of notes have credit enhancement equaling 40.05% of the pool balance. After that, the A1B, A2, and A3 benefit from 30.0%, 23.6% and 15.6% in credit enhancement, respectively. The M1, B1 and B2 tranches have 9.9%, 8.0% and 5.5% in extra credit protection, respectively.
As for those lofty home price values, Fitch set them at 9.5% above a long-term sustainable level but noted that the pool's metric was still lower than the elevated level on a national basis, which is 11.1%.
Barclays Capital is the deal's lead underwriter, Fitch said. Citadel, NewRez and Selene Finance are on the deal as servicers.
Despite that metric, most of the loans (61.9%), are on properties that are owner-occupied. Meanwhile, 38.1% are investor properties or second homes. Also, 27.9% of the loans are a debt service coverage ratio (DCSR) loan product. Fitch notes, however, that unlike legacy alt-A loans the pool conforms to the ability-to-repay standards required by the Consumer Financial Protections Bureau.
Despite some of those risks, Fitch finds that PIMCO's mortgage acquisition platform—which funnels loans into the trust—has sufficient risk controls, while relying on third parties to review loans before the trust purchases them.
Also, the loans have a weighted average (WA) model FICO score of 735, and the borrowers have an original debt-to-income ratio of 42.6%. Also on a WA basis, the original loan-to-value (LTV) ratio is 72.2%
Also, all the loans were subjected to third party due diligence, Fitch said, which added credit to the deal, the rating agency said.
Fitch applies AAA to the A1 notes; AA to the A2 notes; A to the A3 tranche; BBB- to the M1 notes; BB to the B1 notes; and B to the B2 notes.
