Loan Funding Structure is preparing to issue $366.2 million in securitized bonds, backed by a pool of 630 primarily fixed-rate residential mortgages, and where non-qualified mortgages make up the largest portion of the collateral pool.
BRAVO Residential Funding Trust, series 2025-NQM6, collateral pool also includes hybrid, adjustable-rate mortgages, which represent 5.6% of the pool, according to Kroll Bond Rating Agency. The rating agency says 81.9% of the mortgages in the collateral pool were underwritten using alternative income documentation.
The deal will issue the notes through about 10 tranches of notes, which will repay investors through a modified sequential payment structure, KBRA said.
BRAVO Residential derives some credit enhancement from subordination. Excess spread, which represents 1.3% of the notes, will also help shore up the notes, KBRA said.
The deal also includes a step-up rate to the coupon for the A1A, A1B, A2 and A3 notes beginning in July 2029, and the increased rate will be equal to the original class coupon rate, plus 1%. This is subject to a net WAC rate cap, KBRA said.
Five of the most senior tranches will repay investors on a pro rata basis, while the three most senior notes are also exchangeable. Those tranches, the A1A, A1B and A1, benefit from credit enhancement totaling 34.8% on the A1A and 24.8% on the A1B and A1 tranches, KBRA said.
The next two senior tranches of notes, A2 and A3 benefit from 20.10% and 12.10 of the pool, respectively. KBRA says the deal has a final maturity of July 2, 2025.
Morgan Stanley, Barclays Capital, Cantor Fitzgerld and Robert W. Baird & Co. are the initial purchasers on the deal, according to KBRA.
The loans in the collateral pool have an average balance of $518,355, and borrowers have an original FICO score of 746, on a weighted average basis. Borrowers have a median income of $302,539, with liquid reserves of $632,072.
Geographically, the loans have more concentration in California, a state that accounts for 37.2%, KBRA said. Meanwhile, Florida and New York account for 12.2% and 9.7% of the pool, respectively.
KBRA assigns AAA to the three senior notes; AA to the A2 notes; A to the A3 notes; BBB+ for the M1 notes; BBB- to the B1A notes; BB- to the B1B and B1 notes; and B- to the B2 notes.
