The GCAT 2024-NQM2 Trust is preparing to issue $330.7 million in mortgage-backed certificates, supported by a pool of non-qualified mortgages, in a deal that balance the potential risk of assets from originators considered average with top-performing third-party due diligence.
Arc Home, United Wholesale Mortgage and AmWest, are among six originators contributing assets to the collateral pool, according to analysts at Fitch Ratings, which considered most of them as average. Yet multiple third-party review firms, which Fitch rates as "acceptable" performed third-party due diligence on 100% of the loans in the transaction, the rating agency said. Eventually Newrez and AmWest Funding will service all the loans in the transaction, Fitch said.
Blue River Mortgage is sponsoring the deal, Fitch said, which will issue the notes through about nine tranches of classes A, M, B and XS notes. All the notes have a June 2059 stated final maturity date.
As for credit enhancement, the notes benefit from credit enhancement that includes subordination. The capital structure suggests that the B3, XS and A-IOS notes provide the most subordination support to the notes that are higher in the repayment order, given the lack of subordination enhancement at those levels.
Total enhancement on the notes ranges from 27.0% on the A1 notes to 2.95% on the B2 level of notes, the rating agency said.
Pricing guidance on the deal puts yields on the AAA notes at 5.9% and they range to 9.1% on the B- notes, according to Asset Securitization Report's deal database. All of the certificates are priced over the three-month interpolated yield curve. Barclays BMO Capital Markets is the lead underwriter and manager on the deal.
The pool of 671 loans finance primary residences, primarily, with those loans representing 64.4% of the portfolio, and investor loans make up 30.4% of the pool. The underlying assets have, on a weighted average (WA) basis, a model FICO score of 744, Fitch said. On a WA basis, borrowers also have $274,329 in reserves, which is on the higher end of the program's history. Also, 68.5% of the loans are for property purchases, while 25.7% are cash out deals, the rating agency said. Piggyback seconds represent only 0.5% of the outstanding pool, Fitch said.
On average, the loans have a balance of $492,884, Fitch said. In terms of geographic concentration levels, California accounts for 23.0% of the pool.
Fitch assigns AAA to the A1 notes; AA to the A2 notes; A to the A3 notes; BBB to the M1 notes; BB- to the B1 notes and B- to the B2 notes. Kroll Bond Rating Agency, meanwhile, assigns ratings of AAA to the A1 notes; AA+ to the A2 notes; A+ to the A3 notes; BBB+ to the M1 notes; BBB- to the B1 notes and BB- to the B2 notes.
