The GS Mortgage-Backed Securities Trust is preparing to raise $572 million from the capital markets, in a deal that sticks to the script of previous prime jumbo MBS deals.
The current transaction is similar to previous deals issued from the program’s shelf, with no material differences in its cashflow priorities, according to a pre-sale report from FitchRatings. Mortgage cash flows and allocation are based on a senior-subordinate, shifting-interest structure, whereby the subordinate classes receive only scheduled principal and are locked out from receiving any unscheduled principal or prepayments for five years, according to Fitch.
Just 1% of the loans in the underlying pool are agency conforming loans, with United Wholesale Mortgage, Fairway Independent Mortgage Corp., and loandepot.com responsible for the bulk—or all of the originations in the pool. Shellpoint Mortgage Servicing and Cenlar will service the loans, according to Fitch. Wells Fargo has signed on as the master servicer.
GS Mortgage-Backed Securities, 2022-PJ5 did distinguish itself in one area, however—its size. Its pool balance of $572 million is smaller compared with recent deals from the GSMBS program, and the $1.3 billion average for the prime industry from 2020-2022, according to Fitch.
All of the notes have credit enhancement levels of 15%, with a final scheduled maturity date of October 2052. Ratings range from ‘AAA’ on the $243 million, class A-7 notes to ‘AA+’ on the $55.4 million class A-34 notes.
As part of the capital structure, the subordinate classes receive only scheduled principal, and are locked out from receiving unscheduled principal or prepayments for five years. This feature helps maintain subordination for a longer period should losses happen later in the life of the deal.
While the notes are expected to have high ratings sustained by high quality collateral, Fitch cited a potentially negative credit aspect of the deal, stemming from inflation in home prices and Fitch’s own updated view on sustainable home prices. The home prices of the pool are 9.2% above a long-term sustainable level, compared with 9.2% nationally as of April 2022, down 1.4% since last quarter, the rating agency said.
