Chimera Investment Corp. is marketing a second offering of private-label residential mortgage bonds backed primarily by loans on investment properties that are eligible to be purchased by Fannie Mae or Freddie Mac.
CIM Trust 2019-INV1 is backed by 1,304 loans with a total principal balance of $382.9 million. All of the loans in the pool are conventional mortgages made to investors either for business purposes (85.6%) or cash-out refinancing for personal use (14.4%), according to DBRS.
The originators for the aggregate mortgage pool are Caliber Home Loans (27.8%), Home Point Financial Corp. (22.7%) and various other originators, each making up less than 10% of the mortgage loans. The loans will be serviced by Shellpoint Mortgage Servicing (91.4%) and TIAA (8.6%).
Investment properties have greater default risk and recover more poorly than owner-occupied properties. In addition, 42 borrowers have multiple mortgages (89 loans in total) included in the securitized portfolio, which could increase the asset correlation of the pool. In total, borrowers with more than one loan represent 81.2% of the balance. Borrowers with three or more mortgages (with a maximum of 10) represent 47.8% of the pool and generally show considerable income and liquid reserves. However, the weighted average debt-to-income ratio for borrowers with multiple properties is 33.4%, slightly higher than the overall DTI ratio for the entire pool.
Another concern: Some of the originators in the transaction may have limited history in prime securitizations and/or may potentially experience financial stress that could result in the inability to fulfill repurchase obligations as a result of breaches of representations and warranties.
Compared with Chimera's previous investment property RMBS, completed in September 2018, the new deal is backed by loans with a slightly higher average balance ($293,638 vs $277,168), a higher weighted average coupon (5.349% vs 5.093%), slightly higher weighed average FICO (764 vs 760), higher weighted average cumulative loan-to-value ratio (68.7% vs 67.6%), and higher seasoning (six months vs four months).
DBRS expects to assign an AAA to the senior tranche of notes to be issued in the deal, which benefits from 20% credit enhancement.
