A pool of about 5,406 home equity line of credit (HELOC) loans will back a $378 million securitization of first- and junior-lien, revolving home equity lines of credit, which sponsor Saluda Grade Opportunities Fund hopes to close by Friday.
The transaction, Saluda Grade Alternative Mortgage Trust, 2023-FIG4, is comprised of a portfolio that has four months of seasoning on the loans. All of the loans are open-HELOCs with a drawdown period of two, three, four or five years, and collectively the loans have a total current credit limit of $406.1 million, according to DBRS Morningstar, which will assign ratings to the notes. After the respective loans' drawdown periods expire, the repayment periods range from three to 25 years, during which the principal balance is fully amortized over the remaining HELOC term, DBRS said.
All of the loans, as HELOCs, are exempt from the Ability to Repay Rules from the Consumer Financial Protection Bureau. Known as Grade 2023-FIG4, the transaction is the fourth HELOC securitization from Figure Lending, which originated the loans and is the seller and servicer on all of them, according to the rating agency.
Figure is a wholly owned and indirect subsidiary of Figure Technologies, which uses various financial technology, including blockchain, to originate and service loans, loan payments and loan sales, the rating agency said.
Junior liens account for an overwhelming majority of the pool, at a count of 4,770, while the pool includes just 282 first liens. Overall, the loans also have a weighted average (WA) FICO score of 742, an original cumulative loan-to-value ratio of 77.9%, and debt-to-income ratio of 37.5%. Further, the HELOC borrowers are mainly seeking to cash out the equity, DBRS said.
Grade 2023-FIG4 follows a pro-rata cash flow structure, which itself is subject to a credit event based on certain performance trigger events relative to the deal's cumulative losses, delinquencies, and excess spread. If a credit event is in effect, the trust will repay principal to investors sequentially.
DBRS says it will assign 'AAA' to the class A notes; 'A' to the class B notes; and 'BBB' to the class C notes.
