The Fidelis Mortgage Trust, series 2026-RTL1, will raise $112.1 million from the securitization market to purchase a pool of 330 residential transition loans (RTL), whose eventual repayment proceeds will be pledged to repay the notes.
The transaction will issue six tranches of notes, including classes A, M, B and P, according to Morningstar DBRS, whose analysts assessed the notes and assessed the industry's first rated RTL securitization.
Series 2026-RTL1 will repay noteholders sequentially. During a reinvestment period the notes will generally be interest only. After the reinvestment period, the trust will apply principal to repay the notes sequentially.
Fidelis Mortgage Trust is slated to repay the noteholders by September 2028, DBRS said. Jefferies is the initial note purchaser on the deal.
Unitas Funding, wholly owned subsidiary of Fidelis Investors, originated most of the loans pledged to the collateral pool, which are known in the industry as fix-and-flip mortgage loans to fund construction or renovations. They consist of first-lien, fixed-rate, interest-only loans that will make balloon payments after terms to maturity of six to 24 months, according to DBRS.
Investors use the proceeds to purchase and renovate residential or multifamily properties, generally within 12 to 36 months.
Collateral loans could also include extension options, and generally the pool will be defined by eligibility criteria specified in the transaction documents, including a minimum, non-zero weighted FICO score of 730, a maximum loan-to-cost (LTC) ratio of 85.0%, and a maximum loan-to-value (LTV) ratio on an 'as repaired' basis to 70%, DBRS said.
The collateral pool also includes $37.8 million in the funding account and about $750,000 in the interest reserve account.
Classes A and A1 will hold the bulk of notes, containing $232.8 million in total, and they benefit from credit enhancement levels of 19.20% and 25.6%, respectively, the rating agency said.
The deal benefits from three accounts–a Funding, Expense Reserve and Interest Reserve. The Funding Account will fund draws and purchase additional loans. Cash flows to the transaction, after interest payments, will replenish the Funding Account to maintain the minimum required funding balance.
Also, the Funding Account, along with the mortgage collateral must be enough to limit the effective advance rate to no higher than 95.5%, which maintains a minimum credit enhancement of about 4.05% to the most subordinate rated class.
DBRS assigns ratings ranging from (P) BBB (low) (sf) and (P) A (low)(sf) to classes A and A1; respectively to (P) B (low)(sf) on class B, respectively.
