Loan Funding Structure is sponsoring a $370.3 million residential mortgage-backed securities transaction, issuing notes through the Bravo Residential Funding Trust, 2022-NQM1.
About 8.8% of the loans in the pool consist of mortgages underwritten to guidelines for business-purpose investor loans, according to a pre-sale report from DBRS | Morningstar. In these cases, the lender generally expects the rental or lease revenue from property to be the main source of repayment proceeds, the rating agency said.
Otherwise, a majority of the loans, 63.5%, were designated as non-QM loans, in accordance with the Consumer Financial Protection Bureau’s (CFPB) qualified mortgage rules. About 36.5% of the loans in the pool are made to investors for business purposes are also exempt from the CFPB’s Ability-to-Repay (ATR) and QM rules.
As for underwriting, bank statements account for 48.4% of the document types submitted with loan applications, while just 15.5% of applications met DBRS Morningstar’s definition of full documentation.
As for the fitness of the loans, a majority of the pool, 98.5%, is current, according to DBRS. Sixteen of the loans were 30 days delinquent as of the cut-off date, January 31, 2022.
Citibank has several roles on the deal, including note registrar, owner trustee and indenture trustee, according to DBRS.
The deal is slated to close on March 16.
The transaction uses a senior-subordinate structure, with interest and any interest carry-forward amounts paid sequentially to classes A-1, A-2 and A-3, while principal balances will be repaid to those classes on a pro-rata basis until the class principals have been reduced to zero. Payments then flow to the M-1 notes and then the class B notes, sequentially, according to DBRS.
The collateral pool consists of high quality underlying collateral. On average, the loans have a balance of $467,553. On a weighted average (WA) basis, the loans have a coupon of 5.3%, a FICO score of 727, an original cumulative loan-to-value (LTV) and a debt-to-income (DTI) ratio of 31.5%.
By mortgage product type, a substantial majority of the RMBS assets are fixed-rate loans, 80.8%, while five-year hybrid adjustable-rate mortgages (ARMs) represent the next highest concentration, at 11.9%, DBRS said. Primary residences account for the majority of occupancy type, 60.4%, while investor-owned occupancies account for 38.1%, and second homes represent just 1.5% of the pool, according to the rating agency.
