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Single-family homes underpin $750 million Flagstar Mortgage Trust deal

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Flagstar Bank, through the Flagstar Mortgage Trust 2021-4, is preparing to launch a $750 million mortgage-backed securities (MBS) deal secured by high-quality mortgage loans on one- to four-family residential homes and condominiums.

Bank of America Securities and Morgan Stanley are lead underwriters on the transaction, FSMT 2021-4, which is secured by 827 newly originated and 30-year fixed-rate home loans. The loans have been aged just four months, and have a weighted average original FICO score of 773, according to a pre-issuance assessment from FitchRatings.

The original combined weighted average combined loan-to-value (LTV) ratio of 63.7 percent translates to a sustainable LTV of 69.3 percent.

On 96 percent of the loans in the pool are on properties where the borrower maintained a primary residents, and single-family homes comprise 94 percent of mortgaged properties in the pool. Other properties in the pool include condos and multifamily homes. A total of 220 loans in the pool are over $1 million, and the largest is $2.5 million, all on properties domiciled in the United States.

The pool is one of the largest that the FSMT trust has issued in several recent iterations, both in terms of the loan count and the pool balance.

In the context of the COVID-19 pandemic, Fitch has the ability to apply additional scenario analysis based on stress assumptions outlined in “U.S. RMBS Coronavirus-Related Analytical Assumptions.”

All of the notes, which have a legal final maturity of June 2051, are highly rated, and Fitch maintains a stable outlook on them.

The top four ‘AAA’ rated notes, which had credit enhancement levels between 4.6 percent and 15 percent.

While the pool’s primary geographic concentration is California, which accounts for 49.4 percent of the pool, the country’s top three MSAs contribute 30.2 percent of the pool’s collateral, Fitch did not change its loss expectations on the ‘AAA’-rated notes.

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