After raising securitized capital from a portfolio of prime mortgages, Sequoia Mortgage Trust is now setting out to sell $569.9 million in residential mortgage-backed securities (RMBS) from a pool of investment properties, through series 2026-INV1.
Unlike the pool of prime mortgages, which met traditional underwriting guidelines, 62.5% of the investment properties in the 2026-INV1 pool were originated under provisions that exempted them from qualified mortgage and Ability-to-Repay rules, according to Kroll Bond Rating Agency.
Known as SEMT 2026-INV1, the deal will issue about 22 tranches of notes to investors through classes A and B, according to KBRA, adding that the notes all have a January 2026 final scheduled maturity date.
RWT Holdings sponsored the transaction, which comes to market as President Donald Trump, through a social media post, pledged to bar institutional buyers from snatching up single-family homes, the type of properties (and planned unit developments) that secure 83.4% of the loans in the SEMT 2026-INV1.
Rocket Mortgage, loanDepot and United Wholesale Mortgage comprise the largest portion of loans in the collateral pool, accounting for a total of 60.7% of the underlying mortgages by pool loan, according to analysts at Fitch Ratings.
Classes A9, A12 and A18 benefit from credit enhancement levels that equal 15.0% of the value of the notes.
The deal will repay investors on a combined, senior-subordinated, shifting-interest basis. In the latter, the subordinated tranches will receive only scheduled principal payments and are blocked from receiving any unscheduled principal or prepayments for five years, according to Fitch.
As for the portfolio, all of the underlying loans underwent third party due diligence reviews, Fitch said.
KBRA's ratings on the notes include from AAA on the A9 through A22 tranches; to B+ on the B5 tranche. Fitch analysts assigned AAA to the A9 through A22 notes; and ratings ranged from that to B on the B5 notes.
