Cerberus Capital Management is marketing its first securitization of reperforming mortgages of the year.

Towd Point Mortgage Trust 2017-1 is backed by 11,459 seasoned performing and reperforming mortgages with a total balance of approximately $2.1 billion, $177.24 million, or 8.5%, of which is non-interest-bearing deferred principal.

Fitch Ratings expects to assign an AAA to the senior tranche of notes to be issued, which benefit from credit enhancement of 34.15%.

Among Fitch’s primary ratings considerations is the fact that nearly 80% have been making timely payments for the past 24 months, which Fitch Ratings defines as “clean current,” and roughly 20% have recent delinquencies or incomplete paystrings, which Fitch identifies as “dirty current.” Nearly 85% of the loans have received modifications.

The rating agency reduced the pool’s lifetime default expectations by approximately 10.3% for the clean current loans.

As with other Towd Point deals, the servicer will not be advancing delinquent monthly payments of P&I, which reduces liquidity to the trust.

FirstKey Mortgage, as rep provider, will only be obligated to repurchase a loan due to breaches prior to the payment date in March 2018.

Fitch determined that the aggregate servicing fee of 30 basis points may be insufficient to attract subsequent servicers under a period of poor performance and high delinquencies as observed under its AAA rating stress. To account for the potentially higher fee above what is allowed for under the current transaction documents, Fitch’s analysis took into account a 20 basis point rate cut to the weighted average coupon of the pool.

Approximately 30% of the pool is concentrated in California, with 10% concentrated in the Los Angeles area. This is a lower California concentration than we have seen in recent Towd Point transactions, except for the most recent one, TPMT 2016-4.

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