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FirstKey keeps RMBS pipeline flowing in $1.2B NPL mortgage deal

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Pricing of new securitizations have come to near dead stop since the escalation of the coronavirus pandemic this month. But mortgage-backed bond sales of reperforming and nonperforming loans continue to trickle into the market pipeline

This week, presale reports were published on a new $1.23 billion portfolio of loans acquired by FirstKey Mortgage, which is sponsoring its second NPL/RPL transaction this year. It's also the second NPL/RPL transaction this month, following a week after the launch of Chimera Investment Corp.'s next $492.35 million RMBS transaction.

Only three securitizations (including a Freddie Mac "K" program note offerings backed primarily by multifamily commercial loans) have priced in the past two weeks, according to Finsight. (More than a dozen residentian and commercial-mortgage, esoteric and equipment finance deals are in the works, according to recent filings of ABS-15G due diligence reports with the Securities and Exchange Commission).

Towd Point Mortgage Trust 2020-2 consists of 7,358 loans, with an average balance of $166,900 and a weighted average coupon of 4.536%. The loans are well seasoned (averaging 161 months), and over 93% of the loans are current.

However, 5.6% are 30 days delinquent as of the publication of the presale reports from Fitch Ratings and DBRS Morningstar. Another 1.3% are in bankruptcy.

Nearly all of the loans (97.8%) have undergone a modification, most of them more than two years prior.

Fitch said its loss expectation for the transaction or lower than FirstKey’s intitial 2020 transaction, due to “cleaner pay histories, a higher concentration of fixed-rate collateral and a lower Fitch-calculated sustainable LTV.”

Both Fitch and DBRS Morningstar have issued preliminary AAA ratings to three classes of senior notes: a $772.4 million Class A1A1 notes tranche, which has a coupon of 1.8% and benefiting from 37.1% credit enhancement. A Class A1A2 notes offering totals $136.3 million, also with a 1.8% coupon but CE of 26%. A $52.8 million Class A1B tranche has a 3.75% coupon and 21.7% CE.

The deal is slated to close on May 1.

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