Ellington Financial Mortgage Trust, 2022-2, is preparing to come to market with a non-prime residential mortgage-backed securities (RMBS) transaction, issuing about $425.6 million in notes to investors.
An affiliate of Ellington Financial, EF Holdco WRE Assets, is sponsoring the transaction, which will securitize payments from a pool of 998 residential mortgages, according to a pre-sale report from Kroll Bond Rating Agency, which notes that the pool features a notable concentration of alternative income documentation, and a relatively low borrower leverage.
Credit Suisse is an initial note purchaser on the deal, along with Nomura Securities International, and Robert W. Baird & Co., KBRA said. Notes will be issued from a capital structure where principal will be distributed on a pro-rata basis, sequential hybrid structure.
The trust will pay principal to the class A certificates before any is paid to the class M-1 or class B. Also, the notes will benefit from performance trigger-based prioritization of class A-1/A-2 principal and interest payments.
KBRA intends to assign ratings ranging from ‘AAA’ on the $317.7 million, class A-1 notes, to ‘B-’ on the $12.1 million, class B-2 notes.
As of the deal’s cutoff date, all of the loans were current.
Rushmore Loan Management Services will service the certificates, while Nationstar Mortgage is master servicer on the deal, which is slated to close on April 19, according to KBRA.
The loans in the pool, all of which are fixed-rate and first lien, have an average balance of $426,504, and the top five loan balances account for 3.4% of the pool. On a weighted average (WA) basis, the loans have an original term of 387 months. While the mortgage assets were non-prime, the borrowers had several positive attributes. On a WA basis, the borrowers had an original credit score of 741, an original loan-to-value (LTV) of 71.2%, and a debt-to-income (DTI) ratio of 33.5%.
Some 43.9% of the borrowers in the pool were self-employed, and an NZ annual income of $475,688.
A majority of the properties (73.4%) were single-family homes or planned unit developments (PUD), while another 14.1% were condominiums, and multifamily properties accounted for 8.8% of the pool.
