Hildene Capital Management is preparing to sponsor $375.8 million in debt from the CROSS 2024-H5 Mortgage Trust, secured by revenues from a pool of 747 residential mortgages.
CROSS will issue the notes through nine tranches of classes A, M and B certificates, according to a pre-sale report from Kroll Bond Rating Agency. The trust will repay the three class A notes on a pro rata basis, while the mezzanine and subordinate notes will repay the notes sequentially. The B1 notes are exchangeable, KBRA added.
As a result of the pro-rata principal distribution among the class A notes before class M1 or class B notes, the dollar amount of credit support in the form of subordination will decline for the A1 and A2 notes over the term of the securitization, unless a trigger event occurs.
Should a cumulative loss or delinquency trigger event occur, the transaction will forward unpaid interest and then principal sequentially to class A1 through B3, KBRA said.
The notes have a final scheduled maturity date of August 2069, according to Fitch Ratings. The rating agency also noted that credit enhancement levels range from 25.0% on the A1 notes to 1.45% on the B1B tranche.
Most of the certificates are fixed rate and are priced against the three-month interpolated yield curve, according to Asset Securitization Report's deal database. The transaction is expected to pay 5.7% in yields on the A1 notes; and 5.8% and 6.0% on the A2 and A3 notes, respectively. Otherwise, expected yields range from 6.2% on the M1 notes to 8.6% on the B1B notes, KBRA analysts said.
About 64.4% of the loans were designated non-qualified mortgage loans, which do not benefit from the safe harbor legal protections and are more likely to suffer litigation-related losses. Loan originators applied alternate underwriting to 42.7% of the pool, debt service coverage ratio (DSCR) on 21.0%, traditional, full documentation underwriting on 19.6% of the pool and asset underwriting on 7.3% of the loans.
The underlying mortgages have an average loan balance of $503,096. On a weighted average (WA) basis, borrowers had a FICO score of 747, and an original loan-to-value ratio of 71.5%. They have a weighted average debt-to-income ratio of 32.9%, and a median income of $269,682, KBRA said.
A little more than half of the mortgages, 54.2%, finance primary residences, KBRA said. Otherwise investment properties and second homes account for 36.2% and 9.6%, respectively.
Fitch assigns AAA, AA and A to the A1, A2 and A3 notes. The rating agency also assigns BBB- to the M1 notes, the rating agency said. KBRA assigns ratings of AAA to the A1 notes; AA to the A2 notes; A+ to the A3 notes; BBB+ to the M1 notes; BBB- to the B1A notes; BB- to the B1B notes; BB- to the B1 notes and B- to the B2 notes.
