The latest transaction from the Imperial Fund Mortgage Trust will raise $364.8 million in mortgage-backed securities, secured by a pool of primarily newly originated and fixed-rate mortgage loans.
Some 974 loans secure the transaction, the Imperial Fund Mortgage Trust, 2023-NQM1, according to a pre-sale report from Fitch Ratings. A&D Mortgage originated practically all of the loans in the pool, 93.8%. The company's correspondent lenders, originated the rest of the loans 6.2%.
A majority of the loans in the collateral pool, 56.8%, are not subject to the Consumer Finance Protection Bureau's (CFPB) Ability to Repay (ATR) Rule majority 43.2% are designated at non-qualified mortgages.
Several aspects of Imperial Fund Mortgage Trust have potentially negative credit implications, Fitch noted. For one, the underlying loans are highly concentrated, geographically. About 36.7% of the loans in the pool are concentrated in Florida, by state. As for metro statistical areas, the highest concentration, 23.4%, covers the area of New York-Northern New Jersey-Long Island.
Documentation is also a potential issue, as 97.2% of the loans were underwritten to less than full documentation. Some 30.1% of the loans were underwritten to a 12- or 24-month bank statement program for verifying income. The portfolio's non-prime credit quality presents mixed credit implications, according to Fitch. Thirty-year, fixed-rate and fully amortizing loans comprise most of the deal's collateral, at 92.6%. Other parts of the pool include 30-year, fixed loans with an initial interest-only (IO) term, 2.8%; 40-year, fixed-rate fully amortizing loans, 1.8%; one-, two-, five- and 40-year fixed-rate loans with a balloon payment; and 40-year, fixed-rate loans with an initial IO term, 0.5%.
Nomura Securities International is the lead underwriter on the deal, which will issue notes and repay them through a modified sequential structure. All principal is distributed pro rata solely to the classes A-1, A-2 and A-3 classes, after taking into account any current unpaid interest shortfalls. Classes M and B are locked out of principal until all class A certificates are paid off. After that, the trust will distribute principal sequentially to classes M-1, and the B classes.
Fitch assigns ratings of 'AAA' to the class A-1 notes; 'AA-' to the A-2 notes; 'A-' to the A-3 notes; and 'BBB-' to the M-1 notes. Morningstar | DBRS assigns ratings of 'AAA' to the A-1 notes; 'AA' to the A-2 notes; 'A' to the A-3 notes; then 'BBB' through 'B' on the M-1 through B-2 notes.
