A pool of first-lien, adjustable-rate and fully amortized residential mortgage loans will secure $358.2 million in residential mortgage-backed securities (RMBS) through the HOMES 2024-NQM1 Trust, the program's first deal of 2024 and the first in a year.
HOMES will issue certificates through seven rated tranches of classes A, M, and B certificates, according to ratings analysts at S&P Global Ratings, in their assessment. The certificates have a stated maturity date of July 2069, with fixed rates on the A1, A2, A3 certificates and the M1 certificates, S&P said.
Asset Securitization Report's deal database indicates that yields on the certificates will range from 5.77% on the A1 notes through 6.17% on the A3 tranche. Otherwise, the M1, B1A and B1B notes are to see yields of about 6.42%, 7.32% and 8.17%, respectively. Credit enhancement levels include 36.05% on the A1 certificates; 27.75% on the A2 certificates; 14.85% on the A3 certificates and 9.40% on the M1 certificates, S&P said. Among the most subordinate tranches, the B2 certificates have 1.70% in credit enhancement, S&P analysts said.
All notes, which are priced at the three-month interpolated yield curve, are expected to sell virtually at par, according to the database.
In terms of the collateral pool, just 17.80% fall into the category of full documentation, while alternative documentation was used to underwrite 54.45% of loans in the pool, according to S&P. Based on that, the rating agency increased its loss coverages for the loans by an adjustment of 1.75x to 2.25x, it said.
Also, 22.89% of the loans were on investment properties and were underwritten to a lending program that relies on cash flow expectations. The rating agency classified the loans as other documentation loans with a debt service coverage ratio (DSCR) flag and applied a 3.15x to 5.99x adjustment.
On a weighted average (WA) basis, the loans have an original cumulative loan-to-value ratio of 70.9%, S&P said.
The loans, some of which include interest-only features and are extended to prime and non-prime borrowers, finance a wide range of properties including planned-unit developments, condominiums, condotels, two-to four-family homes, a row house, and manufactured housing, the rating agency said.
Citadel Servicing, OCMBC, HomeXpress Mortgage and LendSure Mortgage are the top originators on the pool, accounting for 20.83%, 18.79%, 17.44% and 11.16%, respectively. The other 25 originators make up 31.78% of the pool, the rating agency said.
S&P assigns AAA, AA, and A ratings to the A1, A2 and A3 notes respectively; BBB to the M1 notes; and BBB-, BB- and B- to the B1A, B1B and B2 tranches, respectively.
