Two offerings of private-label mortgage bonds hit the market Wednesday: FirstKey Mortgage is marketing $975 million of bonds backed a combination of reperforming loans and Redwood Trust is marketing $348.5 million of bonds backed by newly originated, prime jumbo loans.
FirstKey, an affiliate of Cerberus Capital Management, is sponsoring Towd Point Mortgage Trust 2016-3, according to DBRS. The notes are backed by approximately 5,356 loans, 81% have been modified. The loans are approximately 107 months seasoned and all are current, including 1.2% bankruptcy-performing loans.
More than 99% of the loans are not subject to Safe Harbor rules, another are subject to the rule and qualify for an exemption under the rule; the remaining 0.6% do not qualify for an exemption.
FirstKey, through a majority-owned affiliate, will acquire and retain a 5% eligible vertical interest in each class of securities to be issued (other than any residual certificates) to satisfy credit risk retention requirements.
Select Portfolio Services will service 84.1% of the loans; the remaining 15.9% are serviced by JPMorgan Chase Bank.
There will not be any advancing of delinquent principal or interest on any mortgages by the servicers or any other party to the transaction; however, the servicers are obligated to make advances in respect of taxes and insurance, reasonable costs and expenses incurred in the course of servicing and disposing of properties.
Redwood’s $348.5 million Sequoia Mortgage Trust 2016-2 is being rated by Kroll Bond Rating Agency.
The collateral is composed of 485 first-lien mortgage loans with an aggregate principal balance of $348,5 million. The pool consists entirely of fully-amortizing, fixed-rate mortgages, all of which have 20-, 25-, and 30-year maturities. The pool is characterized by substantial borrower equity in each mortgaged property, as evidenced by the weighted average original loan-to-value ratio of 68.56%. The weighted average original credit score is 768, which is within the prime mortgage range.
The top originators are New Penn (16.8%), Quicken Loans (7.5%) and Prime Lending (5.0%). Approximately 94.9% of the pool will be serviced by Shellpoint Mortgage Servicing and Cenlar FSB.
Redwood intends to retain the two most subordinate tranches, representing 1.1% of the note balance, but it is doing this as part of its business model. The sponsor is relying on the “qualified residential mortgages” exemption to risk retention rules, and is providing representations and warranties that all the assets in the securitization are qualified residential mortgages.