Non-qualified residential mortgages comprise the majority (58.1%) of a pool of 765 mortgages, which will secure a $345.6 million, mortgage-backed securities deal from the Ellington Financial Mortgage Trust.
EF Holdco WRE Assets is sponsoring the non-prime transaction, for which Nomura Securities, Credit Suisse Securities, Barclays Capital and BTIG, are initial note purchasers, according to a pre-sale report from Kroll Bond Rating Agency.
Nationstar is acting as master servicer on the deal, KBRA said, which is expected to close on July 21. On average, the loans have a balance of $451,833, with the loans in the pool having a maximum balance of $2.5 million.
In terms of underwriting, about 38.6% of the loans were originated using 12- or 24-month bank statement records, and 30.7% were underwritten based on debt service coverage ratios.
While the mortgages underpinning the pool are non-prime, a majority of the loans still retain some conventional of elements of a prime pool. For instance, a vast majority of the mortgage loans in the pool, 71.1%, financed single-family homes or planned unit developments; some 66.7% were purchased; and 53.2% of the properties are owner-occupied.
The rest of the collateral pool is made up of condominiums (16.3%), multifamily homes, of two to four units (9.0%), co-op units (0.01%) and 3.6% of other property types, KBRA said. Another 4.9% are second homes, and 41.9% were investment properties, according to the rating agency.
In terms of the loan purpose, 21.0% of the loans are for cash-out purposes and 12.3% are for refinancings.
Notes will be issued from a senior-subordinate structure, according to KBRA. The three senior classes of notes—which are fixed—will pay out on a pro-rata basis. Credit enhancement levels on the A-1, A-2 and A-3 notes are expected to be 25.7%, 18.6%, and 10.9%, respectively. The rest of the notes, as rated by KBRA will repay sequentially.
KBRA’s ratings on the notes will range from ‘AAA’ on the $256.8 million, class A-1 notes to ‘B-’ on the $6.5 million, B-2 class of notes.
Fitch Ratings also expects to assign ratings to the Ellington Financial Mortgage Trust notes. Fitch's ratings will range from 'AAA' to 'A' on the senior notes, and 'BBB' to 'B' on the M1 to the B-2 notes, the rating agency said.
Ellington Financial Mortgage Trust is geographically diversified, as 28.4% of the pool balance are on mortgages in California, the largest ratio in the pool. Meanwhile, Florida represents 19.6% of loans in the pool; Texas, 9.6%, Utah, 7.5% and Arizona, with 4.4% rounds out the top five states. By central business, or major metro area, the pool is even more diversified. Los Angeles, the largest metro area represented, represents 12.2% of the pool, and Miami follows, with 9.0%.
