The Seasoned Credit Risk Transfer Trust Series, 2021-2, is preparing to come to market with a $1 billion deal backed by seasoned performing and re-performing mortgages.
Fixed-rate and adjustable-rate loans are in the collateral mix. The pool is broken down into mortgages that have no principal forbearance amounts and an interest rate above 5.5 percent, fixed-rate loans with either principal forbearance amounts or no forbearance amounts and an interest rate below 5.5 percent, and fixed- and adjustable-rate loans that were either never modified or were only modified or subject to a Freddie Mac payment deferral program.
In a credit enhancement measure, if the subordinated classes are performing, principal payments will be distributed pro rata between the senior and subordinated classes. The most senior subordinated classes will receive the full subordinate portion of principal, while the capital structure locks out all principal to the subordinated classes if any of the performance triggers are failing.
J.P. Morgan is acting as the lead underwriter on the deal. SCRT 2021-2’s structure is made up of about six classes of notes in total, with a legal final maturity of November 2060. The pool balance is the lowest among several recent deals, as SCRT 2021-1 had a pool balance of $1.2 billion, the SCRT 2020-3 had $1.7 billion.
Five of the classes are expected to receive ratings. Four of the more senior notes have credit enhancement of 6.5 percent.
FitchRatings says ratings are forthcoming, but the deal has several positives from a credit perspective. The rating agency will consider applying further stress scenario analysis based on certain assumptions detailed in its RMBS coronavirus-related analytical assumptions. Also, in general, Fitch has updated its U.S.GDP expectations to reflect more growth as the economy has steadily recovered from the coronavirus pandemic.
While the capital structure does prioritize payments to the senior notes, Fitch noted that peak-vintage re-performing loans dominate make up the collateral pool comprises, and a majority of them have been modified.
Select Portfolio Servicing will service the payment on the notes.
On about 57.4 percent of the pool, borrowers have been paying their mortgages on time for the last 24 months. However, 24.2 percent of the loans have experienced a delinquency within the past 12 months.
