Cerberus Capital Management plans at least one more securitziation of re-performing residential mortgages.
The sponsor is marketing $1.1 billion of securities via Towd Point Mortgage Trust 2015-5, just one month after it priced the 2015-4 transaction. The latest deal will offer Fitch rated 'AAA' bonds with credit enehancement at 47.15%; a slight drop relative to the 50% credit support on the senior bonds in the 2015-4 deal but still higher than the first three deals issued by the sponsor this year.
The deal has all of the hallmarks of its previous transactions. The pool is comprised by a large share (26.4%) of so-called "dirty current" loans. These are loans that are currently performing but have missed at least one payment in the past 24 months or were missing a full 24-month pay history.
The rest of the pool is comprised re-performing loans that have been paying for the past 24 months, which Fitch identifies as “clean current."
The loans have a fairly high original weighted average loan to value ratio of 80.1% and the pool's WA current LTV is even higher, at 98.8%; approximately 36.5% of the loans have LTVs greater than 100%. According to Fitch the increase in LTV reflects "considerable equity deterioration since origination."
Fitch also cites 147 loans in the 2015-5 pool graded ‘D’ as a risk factor of the transaction. A ‘D’ grade indicates that the loans either had prepayment penalties that violated state regulations or had HUD1 Settlement Statement exceptions. Loans of this type can be deemed high cost, and Fitch assumes a loss severity of 100%.
Cerberus began investing in residential mortgages in 2008 and began acquiring reperforming loans in December 2013. The sponsor has executed approximately 46 whole-loan purchases to date.
Cerberus generally tries to purchase reperfomring loans with the following characteristics: 100% first lien, non-agency, single-family originations from 2005-2007. Sellers are mostly large money center or regional banks. As of Aug. 31, 2015, the sponsor owned approximately $6.2 billion of mortgage loans.