Verus Securitization Trust, 2022-2, is planning to issue about $755.5 million in mortgage-backed securities to investors, a set of bonds to be secured by a wide range of collateral types.
A couple of features of the deal are different from previous transactions. For one, large-balance loans make up a very substantial portion of the asset pool, some 42.07%, according to S&P Global Ratings. Such loans have balances that are equal to or greater than $1 million.
Also, the fixed-rate bond coupon on classes A-1 through A-3 are relatively higher compared with the weighted average coupon across the pool, conferring very little credit-enhancing excess spread in the transaction. To offset this potential disadvantage, the transaction has relatively higher levels of hard credit enhancement.
In terms of the high concentration of large-balance loans, that characteristic doesn't seem to pose a challenge to the collateral pool. On a weighted average (WA) basis, they have a current cumulative loan-to-value ratio of 68.5%, and a weighted average FICO score of 745. The former is comparable to the rest of the pool, while the large-balance loans' FICO score was higher, at 736, on a weighted average basis.
Also compared with the overall pool, high-balance loans also have a better outlook for foreclosures; the rating agency says its estimate among high-balance loans is 38.79% at the 'AAA' level, compared with 43.56% of the 'AAA' level of the overall pool.
NQM Purchaser is sponsoring the deal, and NewRez—which is doing business as Shellpoint Mortgage Servicing—will service the loans in the trust, according to S&P.
The collateral pool appears to be highly diversified by originator, as FM Home Loans originated 10.02% of the loans in the pool, and at that rate is the largest contributor to the pool.
S&P expects to assign ratings of 'AAA' through 'A' to the senior notes; 'BBB-' to the M-1 mezzanine level; and 'BB-' through 'B-' on the B-1 and B-2 classes of notes.
