Cerberus Capital Management is marketing its first securitization of re-performing mortgages of the year.
Towd Point Mortgage Trust 2016-1 is backed by a $772.75 million portfolio of 2,868 seasoned first- and second-lien residential mortgages. Just over 62% of the loans have been modified; 363 of them have non-interest-bearing deferred amounts, which equates to 1.0% of the total principal balance. The modifications happened more than two years ago for 92.9% of the modified loans.
The loans are approximately 108 months seasoned, and all are current, including 0.5% held by borrowers in bankruptcy. Approximately 77.3% of the mortgage loans have been current for at least the past 24 months as calculated by both the Office of Thrift Supervision and Mortgage Bankers Association.
FirstKey, an affiliate of Cerberus, will acquire and retain a 5% eligible vertical interest in each class of securities to be issued (other than any residual certificates) to satisfy the credit risk retention requirements.
All the loans are serviced by Select Portfolio Servicing. There will not be any advancing of delinquent principal or interest on any mortgages by the servicer or any other party to the transaction; however, the servicer is obligated to make advances in respect of taxes and insurance, reasonable costs and expenses incurred in the course of servicing and disposing of properties.
Among the deal’s strengths, according to DBRS, is the credit quality of the loans, at least relative to other portfolios of modified loans that it has reviewed.
Also FirstKey, acting as the asset manager, has the option to sell certain non-performing loans or repossessed properties to unaffiliated third parties individually or in bulk sales. The asset sale price has to equal a minimum reserve amount in order to maximize liquidation proceeds of such loans or properties. The minimum reserve amount equals the product of 63.42% and the then-current principal amount of the mortgage loans or REO properties.
Among the deals weaknesses, according to DBRS, the transaction employs a relatively weak representations and warranties framework that includes a 13-month sunset, certain knowledge qualifiers and fewer mortgage loan representations relative to DBRS criteria for seasoned pools.
DBRS has assigned an ‘AAA’ rating to the senior tranches of notes to be issued by the deal; these notes all benefit from credit enhancement of 32.3%.