A pool of reverse mortgages extended mostly to borrowers in California who are 76 years old, on a weighted average (WA) basis will secure a pool of $113.6 million securities, from the Brean Asset-Backed Securities Trust, 2022-RM5.
The deal will issue notes through a senior-subordinate structure, where no subordinate notes will receive any payments until the balance of senior notes has been reduced to zero, according to Morningstar | DBRS.
In one form of credit enhancement, the trust includes a note rate trigger. If the Home Price Percentage declines by at least 30%, compared with the (HPP) value on the cutoff date, the rate for the class A notes will reduce to 0.25%, DBRS.
Brean ABS Trust, 2022-RM5 is expected to repay the notes in full or redeem them by September 2028. If the trust falls short of that, it must conduct an auction of all the mortgage assets within 180 calendar days of the expected repayment date. The trust will apply the proceeds, minus auction-related fees and expenses, to all amounts owed to noteholders, DBRS said.
Nationwide Equities Corp., South River Mortgage and SmartFi Home Loans are the top originators that have contributed loans to the collateral pool, according to DBRS. Some 170 performing loans are in the collateral pool; one mortgage was called due to a borrower death and one defaulted. Most of the loans are first-lien on single-family residential properties, 86.4%.
On an aggregate basis, the single-family loans account for an unpaid balance of $98.1 million, with a WA mortgage interest rate of 8.4%, and a current loan-to-value ratio of 52.31%. Also, the loans in the pool have aged about two months, according to DBRS.
Outside of single-family loans, two- to four-family units, townhouses, condominiums and manufactured homes account for 9.14%, 2.45%, 1.77% and 0.23% of the pool, respectively.
The borrower composition is a little more diversified, according to the DBRS analysis. Couples where the woman borrower is younger accounts for the plurality, at 37.9%, and this group has the lowest current loan-to-value ratio, 50.98%, on a WA basis. After that, single women, single men and couples where the man is younger follow with 28.5%, 20.3%, and 13.1% of the current pool balance.
Geographically, California, New York and Florida account for 55.9%, 16.0% and 9.62%.
DBRS expects to assign 'AAA' ratings to the $126.2 million class A notes, accounting for the vast majority of the outstanding notes. Otherwise, the ratings range from 'AA' on the $2.3 million, class M1 notes through 'B' on the $1.9 million, class M5 notes.
