A pool of reperforming mortgage loans will collateralize $440.3 million in mortgage-backed securities (MBS) from the GS Mortgage-Backed Securities Trust, 2025-SL1.
Known as GSMBS 2025-SL1, the deal is composed of 11,547 seasoned performing and reperforming loans that are first and second lien, originated in what analysts consider a more challenging housing environment, according to Fitch Ratings.
Fitch noted home prices that are elevated 10.9% above a long-term sustainable level as of Q3 2024. While that is still below the national level of 11.1%, rating agency noted that house affordability is at its worst level in decades, due to a combination of high interest rates and elevated housing prices.
The rating agency noted that 21.6% of the collateral pool experienced a delinquency in the past 24 months, and 14.3% had experienced a delinquency in the last 12 months.
GSMBS 2025-SL1, with
The A1, A2 and A3 tranches will benefit from credit enhancement levels equaling 42.2%, 35.8% and 29.6% of the pool balances, respectively. The M1, B1 and B2 tranches benefit from enhancement levels of 24.0%, 19.3% and 15.0%, respectively, the rating agency said.
The transaction will repay investors sequentially, so subordination adds credit enhancement to the notes, Fitch said.
Another positive credit feature to the notes is a 180-day chargeoff feature, Fitch said. With it, the controlling holder can write off the balance of a loan if it becomes 180 days delinquent, based on the delinquency method. The 180-day charge-off feature is more favorable than a delayed liquidation scenario, because in the latter the loss occurs later in the life of the transaction, leaving it with less excess. Subsequent recoveries realized after the writedown at 180 days' delinquency will be passed on to bondholders as principal, the rating agency said.
If conditions exist where the loan servicer--Select Portfolio Servicing, Nationstar Mortgage and Rocket Mortgage are listed—expects to get a reasonable recovery in any liquidation scenario, the controlling holder can direct the servicer to delay charging it off and monitor the loan instead, Fitch said.
Fitch assigns AAA, AA, and A to the A1, A2 and A3 notes; BBB to the M1 notes; and BB and B to the B1 and B2 notes.
