Hildene Capital Management, CrossCountry Mortgage and Cross Country Capital are preparing to sponsor a $413.4 million securitization of residential mortgages through the Hildene-CCC Loan Acquisition shelf.
The deal, Cross 2025-H3 Mortgage Trust, will sell notes secured by a pool of 830, first-lien, non-prime, modified mortgages, and will repay investors through a modified payment structure, according to Kroll Bond Rating Agency.
Cross 2025-H3 Mortgage will issue about 12 tranches of notes, through classes A, M and B, KBRA said. All the class A notes will be repaid on a pro rata basis, and the deal will follow a sequential payment structure from the mezzanine class through the subordinate tranches, the rating agency said.
J.P.Morgan Securities, Goldman Sachs Nomura Securities and Piper Sandler are initial note purchasers and underwriters on the deal, KBRA said.
The most senior tranche, the A1A notes, will benefit from credit enhancement equaling 35.0% of the note balance. The A1B and A1 tranches benefit from 24.0% in credit enhancement, and the subsequent classes of notes have enhancement ranging from 16.2% on the A2 notes to 0.85% on the B2 notes, KBRA said.
Cross 2025-H3 has moderate leverage, according to KBRA, with a weighted average (WA) loan-to-value ratio of 72.3%. Also, the loans have a debt-to-income ratio of 33.5%, the rating agency said.
Yet there are a few caveats, despite the collateral pool's quality. Most of the 830 loans, 68.8%, were underwritten with alternative income documentation. Also, investment properties secures about 41.7% of the underlying loans, and a subset of that group, 23.7%, were underwritten based on debt-service coverage ratios (DSCR), the rating agency said.
Apparently, there are individual investor borrowers in the pool, which includes Deferred Action for Childhood Arrivals (DACA) recipients. They represent just a sliver of borrowers, however, 2.2%, the rating agency said.
The loans have an average balance of $498,107, and a weighted average coupon (WAC) of 7.73%. Just 9.7% of them have an interest-only period, KBRA said.
KBRA assigns ratings of AAA to the A1A through 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 and B1 notes; and B- to the B2 notes.
