A pool of 258 non-qualified mortgages and loans exempt from Ability to Repay rules will secure about $94.1 million in fixed-rate notes, from the CSMC 2022-NQM6 Trust.
Virtually all of the notes are also exchangeable and the deal has a closing date of December 20, according to a pre-sale report from S&P Global Ratings. Subordination, and excess spread when available, provides the credit enhancement on the deal.
DLJ Mortgage Capital is sponsoring the deal, whose collateral pool has a number of loan types. The pool includes first-lien, fixed- and adjustable-rate residential mortgage loans as well as mortgage loans with initial interest-only periods. Loans were extended to both prime and non-prime borrowers, according to S&P.
S&P took a closer look at loan originator Athas Capital Group for the current transaction in light of recent news that the company will be winding down its operations, the rating agency said.
The rating agency applied a 1.05x loss coverage adjustment factor as a result of the transaction-specific review, it said. It added that DLJ Mortgage Capital—not Athas—will make all loan-level representations and warranties for the deal.
Despite this provision to maintain continuity in the deal, S&P pointed out several aspects that might be potential weaknesses. Overall, the pool has a weaker credit profile when compared with S&P's archetypal prime pool, the rating agency said. Borrower FICO scores are 697 on a weighted average (WA) basis. The pool also has a significant number of business-purpose investor loans and foreign-national borrowers, which respectively represent 70.27% and 24.25%, of the pool.
Yet other factors balance out some of these potential credit weaknesses. For one, the pool has limited exposure to spots declared disaster areas in the wake of Hurricane Ian, S&P found in its analyses. The top five CBSAs account for 31.62% of the aggregate pool, including a high concentration of loans extended to borrowers in Florida, which accounts for 29.8% of the pool balance.
On average, the loans have a balance of $364,998, and a majority of the mortgaged properties are single-family homes.
As for ratings, S&P expects to assign 'AAA' through 'A' to almost all of the senior notes, from class A-1A through A-3. The deal's mezzanine piece should be rated 'BBB'; and the rest of the notes in the deal are likely to receive ratings from 'BB' through 'B-', the rating agency said.
