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Caliber first out of the gate with 2018 nonprime jumbo RMBS

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Caliber Home Loans planned to nearly double its non-qualified jumbo originations in 2017 — and the quick ramp-up of its first 2018 securitization appears to bear out the upswing in volume.

The Irving, Tex.-based lender and servicer of large-scale residential mortgages has launched a $401.2 million transaction dubbed COLT 2018-1 Mortgage Loan Trust secured by a pool of 865 high-balance mortgages to wealthy borrowers who have slightly blemished credit or have loan terms that do not comply with the Qualified Mortgage rule.

The loans, with an average seasoning of three months, were mostly originated in the fall as Caliber wound toward its goal of hitting $1 billion in the calendar year, according to a presale report from DBRS. That mark would nearly double the $539 million in loans originated in 2016, when Caliber’s securitizations were nearly half the size (ranging from $162 million to $226 million) and carried twice as much seasoning due to longer ramp-up periods.

Caliber’s first deal also accelerates the calendar schedule of its 2017 deals by nearly three months, with last year’s debut deal not issued until April.
COLT 2018-1 will issue six tranches of rated notes. The $264 million senior tranche of Class A-1 notes is rated triple-A by DBRS and Fitch Ratings and benefits from 34.1% credit enhancement. That marks a returns to the level of enhancement applied to the 2017-1 deal last April, after Caliber introduced performance triggers that would divert the payment flow from mezzanine classes toward the senior-note classes in the event of credit losses. CE then rose sharply to 40% level in the COLT 2017-2 transaction last September, after Caliber chose to shift the triggers off of six-month rolling averages in favor of just current-month data.

Although the triggers remain tied to current month in the current deal, the lower CE level has returned, possibly in connection to a modification Fitch made to its cash flow modeling for non-qualified mortgage RMBS. Fitch conceded in its report that the additional sensitivity it applied to prepay and delinquency curve levels was "overly conservative" and removed it in stress-testing the new deal.

Securitization losses on COLT deals have also remained low, with 60 day-plus delinquencies, bankruptcies and foreclosures between 1.26%-2.44% for the outstanding 2016 COLT asset-backed deals. Additionally, Fitch applied a new cash-flow analysis to the deal that assumed faster prepays and a lower delinquency curve, and conceded "that the prior approach was overly conservative" in assessing the 2017-2 transaction.

Borrowers in the 2018-1 pool have similar credit characteristics to previous COLT deals. The average FICO of 707, loan size of $463,827 and coupon of 6.7% are on par with prior Caliber RMBS transactions. But 2018-1's pool has borrowers with higher incomes ($287,000 annually) and liquidity levels ($202,600), and loans that are seasoned an average of just three months, compared to six- and seven-month seasoning in 2016 deals when fewer originations were being issued.

Presale reports state that 62% were originated through its retail channel and about 38% through its correspondent broker program – both a similar percentage to previous COLT deals.

The pool has a weighted average model credit score of 707 and a weighted average combined loan to value ratio of 80%. All of the loans were underwritten to the full documentation standard in regards to income verification, employment and assets, but “roughly 41% of the pool consists of borrowers with prior credit events and 55% had a debt-to-income ratio of over 43%” that were higher than most loans included in prime jumbo loan securitizations, according to ratings agency reports.

This is only the second transaction from Caliber, a Lone Star Funds affiliate, that includes only loans it alone originated (previous deals prior to Colt’s last deal in 2017 included loans issued by Sterling Bank & Trust).

Most loans (89%) finance primary residences, with the remainder consisting of investor-owned or foreign national-owned homes. Nearly 39% are in California and 13.5% are in Florida.

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RMBS Jumbo mortgages Qualified Mortgages DBRS Morningstar Fitch Caliber Home Loans Lone Star Funds