A pool of 344 residential mortgages will secure a $317 million mortgage-backed securities deal from the Morgan Stanley Residential Mortgage Loan Trust, 2021-3.
The pool consists of prime, jumbo, conforming and non-conforming loans, all of which have been designated as qualified mortgages.
Morgan Stanley will act as the loan aggregator, with Quicken Loans being the largest originator in the pool. Other Morgan Stanley entities will play several key roles on the deal, including Morgan Stanley & Co., which serves as the notes’ initial purchaser. Morgan Stanley Mortgage Capital Holdings, LLC, acts as the transaction sponsor, seller and asset manager, according to an assessment by the Kroll Bond Rating Agency.
The capital structure of the deal features five senior, interest-only, notional classes of notes, four of which correspond with super senior, sequential and pass-through classes. Both FitchRatings and KBRA are expected to assign ‘AAA’ ratings to the senior notes and notional classes.
Six classes of notes provide subordination to the senior notes. All of the notes throughout the capital structure have a legal final maturity date of June 2051.
Also, all of the mortgage loans in MSRM 2021-3 are qualified mortgages, and comply with the set of rules that took effect on March 1, 2021.
The mortgage originators, which included Maxex, Reliant Bank, Quicken Loans, Cross Country Mortgage, extended the loans after the World Health Organization declared a worldwide pandemic in March 2020, KBRA says.
KBRA wrote that it expects loans underwritten after March 2020 to benefit from positive selection and tightened employment verification standards. The timing on the underwriting is offset by a self-employment percentage of 18.5%, which KBRA found is slightly lower than the combined 2020 and 2021 average prime RMBS self-employment percentage of 19.4%. Generally, self-employed workers were hit harder by the pandemic-induced economic slowdown than workers with other employment types.
In addition to a lower concentration of self-employed borrowers, the collateral pool also consisted of borrowers with a weighted average (WA) original credit score of 776, and a debt-to-income ratio of 31.6%. Borrowers also had significant levels of equity in the properties collateralizing the mortgages, giving the portfolio a (WA) original loan-to-value ratio of 68.2%.
