A pool of 656 first-lien non-qualified residential mortgages, most of which CrossCountry Mortgage originated, will serve as collateral for $333 million in mortgage-backed securities (MBS).
The deal, CROSS 2023-H2 Mortgage Trust, is the fruit of a multi-year, strategic partnership with Hildene Capital Management, a Stamford, Conn.-based alternative asset manager, where the latter gets exclusive access to CrossCountry Mortgage's pipeline of non-QM mortgage originations.
They then collaborate on the securitizations, according to a company statement about the deal. Goldman Sachs, with Altas SP Partners as joint lead, structured CROSS 2023-H2 the company said. KBRA also lists Piper Sandler as an initial note purchaser on the deal.
Kroll Bond Rating Agency, which rates the issued notes, says the trust will issue notes through 11 tranches of notes, which will be repaid through a modified pro-rata/sequential payment structure. Three of the senior notes, A1A through A1, are exchangeable, KBRA said.
Aside from its repayment structure, the notes benefit from subordination, KBRA said. The class A1A notes also have a credit enhancement levels of 30.00% on the A1A notes; 26.40% on the A1B and A1 notes; 18.65% and 12.75% on the A2 and A3 notes, which accounts for the credit enhancements on the senior notes.
KBRA expects to assign ratings of 'AAA' to the A1A through 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.
The collateral pool is overwhelming made up of non-prime mortgages, 61.2% of which fall into the non-qualified mortgages category. Another 38.8% of the loans are classified as exempt from the ability-to-repay/qualified mortgage rule, because they were originated for non-consumer loan purposes.
Despite some non-prime characteristics in the pool of loans, all of which are first lien, the loans have an average pool balance of $507,301. On a weighted average (WA) basis, the loans have an original credit score of 739 and they have an original loan-to-value ratio of 70.9%. On a non-zero WA basis, borrowers have an annual income of $1.1 million, and liquid reserves of $437,698.
The pool is also geographically diversified, with mortgages originated in California accounting for 18.1% of the pool balance, the highest concentration. After that, Florida, New York, New Jersey and Texas represent 18.0%, 12.0%, 8.5% and 6.3% of the pool, respectively.
