APF II Resi O4B is preparing to sponsor a securitization of revenue from a pool of 900 mortgages, primarily newly originated, in its fifth non-qualified mortgage securitization of the year, raising $489.7 million.
Non-prime loans—with a count of 844 loans and representing 93.1% of the pool—also comprise the vast majority of the asset pool. Debt service coverage ratio (DSCR) and bank statement documentation account for underwriting on 36.68% and 42.3% of the pool's assets, respectively.
Slightly more than half of the pool, 50.1%, are second-home or investor properties, Fitch said, and slightly more than half of the borrowers, 55.6%, are self-employed, the rating agency said.
HOMES 2026-NQM5 Trust will issue the residential mortgage-backed securities (RMBS) through 10 tranches of class A, M and B notes, according to analysts at Fitch Ratings. All the notes have a final scheduled maturity date of July 2071, according to Fitch.
The class A notes include first cash flow and last cash flow tranches, both of which benefit from 28.31% in credit enhancement, Fitch said. Following that in seniority, the A1A, A1B, A2 and A3 notes have credit enhancement levels of 38.31%, 28.31%, 21.65% and 11.75%, respectively.
Cake Mortgage, Citadel Servicing, and Angel Oak Mortgage primarily originated the loans in the pool. Outside of that the originators are fragmented, not accounting for more than 10% of the current balance, Fitch said.
Morgan Stanley is the transaction's lead underwriter.
The underlying loans have an average balance of $544,179, Fitch said. They have three months of seasoning and a weighted average (WA) original loan-to-value (LTV) ratio of 71.9%. Fitch says the loans have a FICO score of 741.
Borrowers have a debt-to-income (DTI) ratio of 33.8%, and liquid reserves of $339,511, Fitch said.
Almost all the loans are fixed rate, 98.3%, and interest-only loans account for only 14.9% of the pool, according to the rating agency.
Fitch assigns AAA ratings to the A1 notes.
