Six hundred and thirty residential mortgages of non-prime credit quality are securing $318.7 million in mortgage-backed securities through the CROSS 2024-H4 Mortgage Trust.
The mortgages were originated by
The pool's average loan balance is $505,894. The weighted-average reserves are $447,425, which compares favorably with the non-prime industry average of $284,605 from 2021 to 2024, Fitch Ratings says.
Some 62.7% of the loans are classified as non-qualified mortgages, and 37.3% are exempt from ability-to-repay/qualified mortgage rules because they were originated for non-consumer loan purposes, according to Fitch. No prior delinquencies were reported as of the cutoff date, and the entire collateral pool is considered "clean current," Fitch says.
Hildene Capital Management, in affiliation with CCM and CrossCountry Capital, is sponsoring the transaction, which was expected to close on June 26, 2024. Select Portfolio Servicing is acting as servicer, and Computershare Trust Company is master servicer.
The CROSS platform was established in 2022 to create a scalable nonqualified mortgage investment strategy. It started issuing stand-alone securitizations in 2023.
Fitch says that around 69.7% of the pool's loans were underwritten to less than full documentation. Some 36.0% of them were underwritten to a 12- or 24-month bank statement program for verifying income, which is not consistent with Fitch's view of what constitutes a full documentation program.
The borrowers have a moderate credit profile (Fitch FICO score: 747) and a 43% debt-to-income ratio, which factors converted debt service coverage ratio to DTI values, plus moderate leverage (an 81.0% sustainable loan-to-value ratio). Of the pool's loans, 51% represent the borrower's primary residence, while 49% are an investor property or second home, Fitch says.
KBRA says the transaction does not exhibit high core-based statistical area concentrations compared with other non-agency mortgage securitization pools.
The home price values in the pool are 11.1% above a long-term sustainable level, according to Fitch, which argues that housing affordability is the worst it has been in decades, driven by high interest rates and elevated home prices.
The trust will repay senior note investors principal amounts on a pro rata basis, shutting out subordinate bonds from principal payments until all senior classes are reduced to zero, Fitch says. If a cumulative loss trigger or delinquency trigger event occurs in a given period, principal will be distributed sequentially to class A-1, A-2 and A-3 certificates until they are reduced to zero.
Fitch assigned an AAA rating to the A-1 notes, AA to the A-2 notes and A to the A-3 notes. It assigned BBB- to the M-1 notes, but didn't rate the remaining notes. KBRA rated the A-1 notes as AAA, the A-2 notes as AA and the A-3 notes as A+. It rated the M-1 notes as BBB+, the B-1A notes as BBB-, the B-1B and B-1 notes as BB- and the B-2 notes as B.
