CarVal Investors has joined the growing ranks of players securitizing re-performing mortgages.
The alternative investment fund manager is planning to offer $474.1 million of securities backed by re-performing mortgage loans via Mill City Mortgage Loan Trust 2015-1.
CarVal is an independent subsidiary of Cargill, and has two main business units —Credit Funds and Real Estate Funds. The firm is headquartered in Minneapolis, with five additional offices in London, New York, Paris, Luxemburg and Singapore. As of October 2015, its assets under management totalled approximately $10 billion.
Mill City 2015-1 will offer mostly modified re-performing loans. Of the 1,369 loans in the pool, 90.1% have been modified, and for a majority of the modified loans, the modifications happened more than two years ago. Over that 24-month period, the loans have demonstrated a consistently improved payment pattern, including rate reductions, term extensions and deferrals.
The pool consists of 37% fixed-rate mortgages and 63% hybrids adjustable-rate mortgages. These variable interest rate loans adjust periodically after a fixed period, of which 48% consists of step rate loans whose coupons increase gradually over time and 15% comprise various adjustable-rate loans. In addition, 12% of loans have remaining interest-only features.
Loans have a current weighted average FICO of 707 and a weighted average loan-to-value ratio of 85.3%
The loans, on a weighted average basis, have an 8.83-year payment history. The majority of the loans (94.1%) have been clean for the past 24 months. Furthermore, after removing delinquencies that may be related to servicing transfers, 97.7% of the loans may be considered clean for the past 24 months. In addition, 73.2% of the pool has remained consistently current for the past 36 months.
DBRS and Fitch Ratings assigned preliminary 'AAA' ratings to the class A notes that benefit from 39% credit enhancement.
Shellpoint Mortgage Servicing will service 56.2% of the loans and Fay Servicing the remaining 43.8%.
Re-performing loan issuance has been on the rise year-over-year; the BofA Merrill Lynch chart below shows the growth of the asset class over the years.