Kiavi Funding has sponsored a rated residential transition loan (RTL) securitization, raising $400 million from investors through its LHOME shelf, and becoming only the second such transaction known to hit the market.
LHOME Mortgage Trust 2024-RTL4, issued notes to investors through four tranches; A1 and A2 notes; and M1 and M2, according to a statement from Kiavi. While the company said the transaction sold all offered notes, the Asset Securitization Report's deal database reported that they priced at 99.9%--or about at par. Yields range from 5.9% on the A-rated A1 notes to 9.5% on the B-rated M2 notes, which were assessed by DBRS Morningstar. All notes were priced to the three-month, interpolated yield curve, according to the database.
As for ratings on the rest of the deal, DBRS assigns BBB to the A2 and BB to the M1 tranches.
Nomura Securities International was the sole structuring agent, Kiavi said, adding that Barclays Capital and Performance Trust Capital Partners joined Nomura as joint bookrunners and co-lead managers on the deal.
DBRS says the notes will repay investors sequentially, after a two-year revolving period. That's when proceeds from principal payoffs can be reinvested in the deal through newly originated loans that can then be added in, Kiavi said. During the revolving period, the notes will generally be interest only, DBRS said. If the issuer does not redeem the notes by the January 2027 repayment date, then the class A1 and A2 notes, which are fixed rate, will step up by 1.0% the following month, the rating agency said.
During the transaction's reinvestment period, DBRS said, mortgage collateral amounts plus amounts held in the Accumulation Account must be sufficient to maintain credit enhancement levels of about 4.45% to the most subordinate rated class, DRBS said.
LHOME also makes use of an expense reserve account, funded upfront to an amount equal to $3 million, to cover months of interest payments to the notes, DBRS said.
The transaction has several positive credit and asset qualities, including that the pool composition is considered robust. As of March 2024, Kiavi RTL originations for one- to four-unit residential properties has historically experienced 3.8% of cumulative 60-plus-day delinquencies by unpaid balance.
