Chimera Investment Corp. is sponsoring a securitization of a pool of 1,203 mortgage loans on investor properties, aiming to raise $434.6 million in mortgage-backed securities from the market.
CIM Trust 2021-INV1 is a high-quality portfolio, comprised of agency-eligible mortgage loans, extended to a pool of borrowers with a weighted average score of 770. On a combined basis, the loans carry a WA loan-to-value ratio of 64.6%; and a WA debt-to-income ratio of 32.6%, according to Moody’s Investors Service.
Statistically speaking, just a handful of loans in the securitized pool, around 0.7% or eight loans, had been enrolled in a coronavirus related forbearance plan. Should a loan enter into a COVID-related relief program, the servicer will step in to make advances on delinquent principal and interest, Moody’s said.
On average, the loans have a balance of $361,320, and a WA rate of 3.4%, and all of the loans in the pool are first-lien loans, and underwritten on a full-documentation standard.
CIM Trust’s capital structure uses a shifting interest template, benefiting from a senior-subordinate floor of notes, and a subordinate floor. The notes also have a legal, final maturity of July 2051. Expected losses, according to Moody’s, are 0.8% at the mean, and the 0.54% at the median in a base-case scenario.
The pool is not without potential challenges, however. For one, self-employed borrowers make up 25.1% of the pool by stated principal balance. Given income volatility in their cases, Moody’s remains watchful of how long the self-employed borrowers have been working independently, and whether they have access to high levels of liquid reserves.
In another area to watch, the pool is comprised entirely of investment properties, which have a higher loss severity than owner-occupied loans. Typically, investment properties have lower balances and they are of lower quality than owner-occupied homes.
Ongoing economic risks stemming from the coronavirus are also a potential credit challenge, Moody’s says. While it expects economic activity to continue to strengthen in 2021, social restrictions could impact specific sectors and businesses.
Ongoing variant outbreaks have complicated re-openings and the health of sectors such as retail, lodging and restaurants.
Moody’s expects to assign ‘AAA’ ratings to virtually all the notes that it has evaluated in CIM Trust.
