A portfolio of residential transition loans from a group of four originators will collateralize about $477.2 million in asset-backed bonds to be issued from the Homeward Opportunities Fund Trust, series 2025-RRTL2.
The deal, slated to close on September 12, will issue the notes through seven tranches of class A, M and XS notes, according to ratings analysts at Morningstar | DBRS. The collateral pool is an 18-month revolving portfolio of residential transition loans, when additional loans can be added, if they satisfy eligibility criteria.
From class A1 through M2, the notes benefit from credit enhancement levels ranging from 23.25% to 5.0%, according to DBRS. Those credit boosts come from several mechanisms, including subordination, overcollateralization and excess spread.
Homeward Opportunities also includes an accumulation account to help fund drawdowns related to construction costs and the purchase of additional mortgage loans during the reinvestment period, DBRS said.
DBRS assigns ratings of A to all the class A notes; and BBB, BB and B to classes A2, M1 and B, respectively.
Wells Fargo Securities leads a group of initial purchasers, which includes Morgan Stanley, Performance Trust Capital Partners, and ATLAS SP Securities, according to DBRS, which added that the notes are slated to mature in September 2040.
Those criteria include, on a weighted average (WA) basis, a minimum non-zero, FICO score of 735; a loan-to-cost ratio of 80%; and a maximum non-zero repaired loan-to-value ratio of 70.0%.
The pool is composed of 209 RTLs, according to DBRS, which are short-term bridge loans used to renovate properties, and are repaid from the proceeds of the eventual property sale.
The transaction also uses certain collateral performance triggers that can start a countdown to early amortization. For example, if the pool's 60-plus delinquency rate is greater than 10.0% for each of the last three months, that could trigger early amortization. Another trigger applies if the 12-plus month extension rate is greater than 5.0% for each of the last three months. DBRS said.
