A pool of first-lien and non-qualified mortgages, from issuer EFMT 2026-NQM10, will secure $521 million in residential mortgage-backed securities, due to come to market in about one week.
EFMT 2026-NQM10 will sell notes through A, M and B classes of notes, with a final maturity date of September 2071, according to Morningstar DBRS. The pool balance is the largest the platform has issued since the 2026-NQM5 series closed in May, issuing $504.1 million.
Two of the most senior classes are first- and last-cash flow classes. Almost all the class A notes have credit enhancement levels of 23.50%, except the A-1A tranche, whose enhancement level is higher, at 33.50%, DBRS said.
The rating agency also notes that classes A-1FCF through A-1F will repay noteholders on a pro rata basis, while classes A2 through B3 will be repaid sequentially.
Barclays Capital, Mizuho Securities, Nomura Securities International and
LendSure Mortgage, The Loan Store and Champions Funding originated most of the loans in the pool, representing 58.07% of the pool. Other lenders are responsible for originating 41.93% of the underlying assets.
A significant percentage of the pool, though not majority, 41.7%, are designated as non-QM, DBRS said. Some 43% of the loans were underwritten to debt service coverage ratio (DSCR) standards. Although those loans rely on the related property's cash flow, or rental income, to qualify borrowers.
Yet DSCR loans have performed better, generally, than loans originated before the financial crisis, and more closely to non-QM loans than initially expected. Other compensating factors include lower loan-to-value ratios.
The pool includes 1,252 loans related to 1,265 properties, and the pool has an average balance of $416,194 and a weighted average (WA) coupon of 7.11%, DBRS said. Borrowers also have a debt-to-income (DTI) ratio of 33.93%, and a FICO score of 744, both on a WA basis.
Borrowers have a non-zero WA annual income of $459,397, and liquid reserves of $224,158.
The rating agency added that servicers will fund advances of delinquent principal and interest until the loan is either greater than 90 days delinquent, or servicers determine P&I cannot be repaid from underlying borrower accounts.
DBRS assigns ratings ranging from (P) AAA (sf) on the most senior class A notes to (P) B (sf) on the class B2 notes.
