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FirstKey returns with $507M manufactured housing MBS

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FirstKey Mortgage is sponsoring a rare pooling of manufactured housing loans in a $507.1 million securitization.

Towd Point Mortgage Trust 2020-MH1 is backed by 12,555 seasoned loans for manufactured homes — with a majority (98%) classified as chattel loans that are secured only by the structure rather than by real property.

The loans are well-seasoned (114 months) and all are current, with 96% showing 36-month clean-pay histories, according to a presale report from Fitch Ratings.

The deal is FirstKey’s second asset-backed pool of manufactured housing loans serviced by Credit Suisse subsidiary Select Portfolio Servicing that follows the firm’s first manufactured-housing pool offering last September.

Both transactions are the only post-crisis mobile-home loan pools that Fitch has rated.

Manufactured housing loans are riskier assets for mortgage-backed securities, generally experiencing higher defaults and lower recoveries than other types of mortgages, according to the reports.

The defaults are not only higher, but are reported under the less-restrictive Office of Thrift Supervision methodology compared to Mortgage Bankers Association guidelines for servicer-reported delinquencies.

Fitch assigned a preliminary AAA rating to the Class A1 $442.2 million tranche that benefits from 12.8 % credit enhancement.

Borrowers in the pool have a weighted average FICO of 722 and average loan balances of $40,391; about 94% have loans with fixed-rate terms averaging 7.5%, and 59% have short durations (15 years) compared to standard mortgage terms, which have lower observed default rates, according to Fitch.

The largest concentration of homes is in Texas (20.1% of the pool collateral balance).

Fitch has a base-case loss expectation of 9.5%.

JPMorgan is the lead underwriter.

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MBS Manufactured homes