Jefferies Group is sponsoring a one-year, revolving warehouse securitization to fund a pipeline of first-lien, GSE-eligible mortgages for eventual placement with Freddie Mac and Fannie Mae.
Jefferies is housing the initial round of $300 million in loans under a repurchase agreement with four lenders, as well as with the trust established for the transaction in Jefferies’ standing as the repo seller.
The deal, dubbed Station Place Securitization Trust 2019-WL1, is Jefferies’ fourth prime mortgage-warehouse securitization and its first in two years. The loans are being acquired from four originators: loanDepot, Mr. Cooper, Provident and United Wholesale Mortgage, according to a presale report from Moody’s Investors Service.
Moody’s report stated the trust will sell six classes of notes secured by the loans in the pool. The Class A notes totaling $201 million have preliminary Aaa ratings from Moody’s; each of the five subordinate classes have investment grade ratings ranging from Aa2 to Baa3.
Moody’s has an expected base case loss scenario of 6.65%.
Under the terms of the transaction, Jefferies can add eligible fixed-rate and adjustable-rate mortgages to the pool so long as they meet minimum criteria and include Jefferies representations and warranties as the seller. Among the conditions are borrower FICO scores of no less than 620, without impacting the minimum weighted average 715 FICO for the pool of purchase mortgage loans; the maintenance of an aggregate loan-to-value ratio of no more than 85%; and maximum debt-to-income ratios of 55%.
The deal’s balance of ARM loans cannot exceed 25% of the unpaid balance of the pool at any point, according to Moody’s.
Jefferies is required to pay the full aggregate repurchase amount of the loans from the four lenders by the end of the one-year term to pay off the notes. If the deal terms out, it will convert to a static pool of mortgages which will then use proceeds to pay down the notes.
