Morgan Stanley markets $294.3 million pool of prime residential mortgages 

Andrea Verdelli/Bloomberg

The pool for Morgan Stanley Residential Mortgage Loan Trust 2023-2 (MSRM 2023-2) consists of fixed-rate, first lien prime quality mortgages. Twenty-five classes of notes totaling $294.3 million are being issued, of which $250.1 million are super senior and $23.7 million are senior support, according to Kroll Bond Rating Agency. 

The pool, which comprises 309 prime-quality loans, contains loans from other mortgage originators that were acquired by Morgan Stanley in its prime-jumbo aggregation process. The top three originators were CrossCountry Mortgage, United Wholesale Mortgage, and Fairway Independent Mortgage. MSRM 2023-2 is the tenth such transaction for Morgan Stanley and its second prime transaction in 2023, according to Fitch Ratings.

Compared to MSRM 2023-1, this transaction has a slightly higher FICO score (777 versus 765), higher liquid reserves ($524,100 versus $406,681), fewer junior liens (0.0% versus 0.9%), and more purchase loans (94.8% versus 72.4%), Fitch said. The pool balance of $294.3 million is lower than the balance of $349.5 million for MSRM 2023-1, and seasoning of 5.5 months is also lower than MSRM 2023-1's 14.9 months. However, overall, Fitch considers the pool to be of extremely high quality.

Single-family homes account for 92.3% of the pool collateralization, and condos for the remaining 7.7%. There are no investor loans or multi-family homes in the pool, which Fitch views favorably. Only six loans are for non-permanent residences.

Fitch views the home price values of this pool as 7.4% above a long-term sustainable level (versus 7.8% on a national level) as of March 2023.

The majority of the underlying collateral includes prime jumbo non-conforming loans, all of which have been designated as Qualified Mortgages, KBRA said.

Morgan Stanley Mortgage Capital Holdings is the sponsor, seller and asset manager. Nationstar Mortgage is the loan servicer and Citibank is the trustee. The loan closing date is July 28 and the final maturity date for all note classes is June 2053.

According to Fitch, the mortgage cash flow and loss allocation are based on a senior-subordinate, shifting-interest structure whereby the subordinate classes receive only scheduled principal and are locked out from receiving unscheduled principal or prepayments for five years. The lockout feature helps to maintain subordination for a longer period should losses occur later in the life of the transaction. 

Both Fitch and KBRA expect to assign an AAA rating to the class A notes, and AA- to class B-1, according to the Asset Securitization Report deal database.