A pool of 392 nonqualified mortgages, overwhelmingly, is securing $251.38 million in residential mortgage-backed securities notes issued through the CSMC 2021-NQM4 trust.
The underlying pool is comprised of 78% non-QM loans, while 20% are investment properties not subject to the Ability to Repay Rule, as stipulated by the Consumer Financial Protection Bureau.
Despite the quality of the loans in the pool, several aspects of the deal moderate the credit risks, FitchRatings notes. For starters, borrowers on the underlying loans have a 738 weighted average, model FICO score, as calculated by Fitch. They also have a relatively low leverage, with a sustainable loan-to-value ratio of 75.2%. Also, no loans were delinquent as of the cutoff date.
The loans’ average loan balance was $641,277, one of the higher average balances among the comparison pools that Fitch has recently rated.
Credit Suisse plays a large role in the transaction, first as lead underwriter and the Credit Suisse First Boston Mortgage Securities Corp. is the depositor on the deal. Originators include AmWest Funding Corp., Sprout Mortgage, LLC, and Athas Capital Group.
The pool does benefit from a material amount of excess cash flow that benefits the rated notes before being paid out to the class XS notes. Also, as of the closing, Fitch expects the transaction to benefit from about 311 basis points of excess spread.
Yet the underlying pool does have its challenges. For one, about 89% of the loans in the pool were underwritten using alternative documentation. Of that group of loans, 38.8% were underwritten using a 12- or a 24-month bank statement program to verify income, which is not consistent with Fitch’s perspective of a full-documentation program.
About 7.9% off the mortgages in the pool have experienced a delinquency in the last 24 months, and about 3.6% of the loans in the pool were extended to borrowers that are foreign nationals or nonpermanent resident borrowers.
The deal’s capital structure features a modified sequential payment structure, plus payment advance provisions. The structure distributes principal pro rata among the three senior notes, while shutting out the subordinate bonds from any principal distributions until the balances on the senior classes are paid down to zero.
If any of the mortgage loans slip into delinquency on principal and interest obligations, the servicers, Select Portfolio Servicing and AmWest Funding Corp., will advance the payments for the first 180 days of delinquency.
