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Caliber's next RMBS backed by more loans to 'elite access' borrowers

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Caliber Home Loans is going upscale in its fourth securitization this year of prime and nonprime first-lien residential mortgages.

The $354.5 million COLT 2018-4 Mortgage Loan Trust has built up a 42% concentration of loans from the lender’s highest credit tier, herding homeowners with high net incomes and high-cost housing into a recently launched “elite access” class of borrowers. It represents the largest segment of borrowers backing the transaction, according to presale reports from DBRS and Fitch Ratings.

By comparison, the elite access tier accounted for just 7% of the collateral for Caliber’s previous mortgage bond offering, completed in September now
Portfolio loss assumptions from each agency were reduced in the new transaction. DBRS decreased its stressed-scenario loss assumption to 21.4% from 23.25% in COLT 2018-3, while Fitch reduced to 23.25% from 26.25%.

With the stronger borrower credit profile, COLT 2018-4 features Caliber’s highest-ever weighted average FICO (724), highest borrower income ($344,782), lowest WA coupon (6.059%) and highest average loan balance ($570,842) than in any of its prior sponsored asset-backed deals.

Caliber also has its highest concentration to date of fixed-rate mortgages (68.8%) as it continues a retreat from financing and securitizing hybrid adjustable- rate mortgages. The hybrid ARM set makes up just 22.4% of the current pool, versus nearly half in COLT 2018-3.

While 55.9% of the mortgages are considered non-QM, that is reduced from 65.7% in September’s issue.

It is the fifth consecutive transaction sponsored by Caliber, an affiliate of Lone Star Funds, which had no third-party originations. All of the loans are considered full documentation, as well, a recent feature in COLT offerings limited to Caliber-only originations. (Caliber has been originating loans since the fourth quarter of 2014.)

The notes offering includes three senior note tranches, two mezzanine bond classes and three subordinate tranches. The senior notes feature a $243 million Class A-1 tranche with preliminary triple-A ratings from DBRS and Fitch, a double-A rated Class A-2 bonds sized at $34.39 million and single-A Class A-3 bonds totaling $26.1 million.

The notes are backed by the pool of 621 loans, of which 155 were the “elite access” variety that carries average balances of $960,271. The loans are made to borrowers with strong credit history and nonconforming balances that do not meet prime jumbo guidelines due to interest-only features, higher debt-to-income or loan-to-value ratios or previous credit problems.

Another 34.5% of the pool’s loans were underwritten to “premier access borrowers” who also carry large nonconforming balances. Many of these borrowers are not categorized in elite access due to reported late pays within the past year.

The remaining loans are to subprime borrowers with recent derogatory credit marks; a small sliver of loans (1.2%) in the pool are investor loans.

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RMBS RMBS prime jumbo