Imperial Fund Mortgage Trust 2021-NQM2 is preparing to issue about $237.4 million in mortgage pass-through certificates, to continue funding mortgages to a range of borrowers, including those funding investment purchases.
Imperial Fund II, LLC is sponsoring the transaction, which is secured by loans that A&D Mortgage, LLC originated through six lending programs. A&D extended the loans mostly through the ability-to-repay (ATR) rules implemented by the Consumer Financial Protection Bureau (CFPB), which captures self-employed, prime and super prime borrowers and even foreign nationals, according to DBRS Morningstar.
Citibank is acting as the administrator and certificate registrar on the transaction. The senior-subordinate capital structure calls for the pro rata distribution of principal among the senior tranches. DBRS also notes that for classes A-1 through B-1, the trust can also use excess spread to cover realized losses and prior period bond write-down amounts first before being allocated to unpaid cap carryover amounts.
A&D Mortgage will act as servicer on the deal, while Nationstar Mortgage will take on the role of master servicer.
Among the collateral pool’s strengths are a weighted-average (WA), original combined loan-to-value (LTV) ratio of 69.6%, indicating that the borrowers have significant amounts of equity in the homes. Further, about 66% of the mortgage loans were underwritten in accordance with the eight underwriting factors of ATR rules. As of the cutoff date to aggregate the loans, 100% of the pool was current, according to DBRS.
As for the overall characteristics of the underlying loans, fixed-rate mortgages comprise 95.9% of the pool, with hybrid adjustable-rate mortgages accounting for just 4.1%.
DBRS noted that underwriting standards had improved significantly since the pre-crisis era, particularly involving income, asset and employment verification, and appraisal and reserve requirements. For instance, full-documentation for income verification requires the borrower to produce one to two years of W-2s, two months of asset statements, plus a verbal verification of employment, along with other requirements.
If borrowers plan to use bank statements as income verification, then generally, one of the borrowers must be self-employed. Also, the borrower must submit 12 or 24 months of personal or business bank statements.
DBRS expects to assign ‘AAA,’ ‘AA,’ and ‘A’ ratings to the class A-1, class A-2 and class A-3 notes, respectively. The M-1 mezzanine class should receive a rating of ‘BBB,’ while classes B-1 and B-2 might receive ‘BB’ and ‘B,’ respectively.
