Cerberus Capital Management is back with its third securitization of reperforming mortgages of the year; it's also the smallest, at $784 million; a deal completed in March totaled $945 million and the inaugural deal of the year weighted in at over $2 billion.

Otherwise, Towd Point Mortgage Trust 2017-3 is remarkable similar to the two previous deals. It backed by a portfolio of 4,936 first-lien residential mortgages totaling $784,327,823 that were once delinquent but are now making timely payments. Some 85% of the loan were modified; most of these (82.7%) more than two years ago.

Within the pool, 972 mortgages have non-interest-bearing deferred amounts, which equates to 5.6% of the total principal balance.

All of the mortgages are current; approximately 71.3% of the mortgage loans have been making timely payments for the past 24 months. The majority, 95.4% are not subject to ability-to-repay rules; another 3.6% subject to the rule but quality for a safe harbor from consumer lawsuits; less than 0.1% are classified as having rebuttable presumption protection, and 0.9% do not comply with the Qualified Mortgage rule.

All were purchased on the secondary market by funds managed by affiliates of Cerberus between 2013 and 2017. All will be serviced by Select Portfolio Servicing.

DBRS and Morningstar Credit Ratings, Fitch Ratings and Moody's Investors Service all expect to assign triple-A ratings to the senior tranche of notes to be issued, which benefit from 33.75% credit enhancement.

As is typical of securitization of reperforming mortgages, 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 homeowner association fees, taxes and insurance, reasonable costs and expenses incurred in the course of servicing and disposing of properties.

FirstKey Mortgage, an affiliate of Cerberus and the sponsor of the deal, 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.

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