Morgan Stanley Mortgage Capital is sponsoring its first sponsored residential mortgage-backed securities (RMBS) deal of the year, raising $376.6 million, backed by its largest securitized pool of non-qualified mortgages since 2024.
The deal, Morgan Stanley Residential Mortgage Loan Trust, 2025-NQM1,
is slated to close this week, and will issue notes through 15 tranches of notes, with ratings from S&P Global Ratings and Kroll Bond Rating Agency. The most senior notes will repay investors pro rata, while the mezzanine and subordinate classes repay sequentially, according to KBRA.
A class and mezzanine notes pay a fixed rate, and the B1 classes are variable, KBRA said. After closing, the notes pay on the 25th day or each month, with a final maturity date of Nov. 25, 2064, according to KBRA.
The collateral pool contains 939 first-lien loans paying fixed and adjustable rates to the pool. They are fully amortizing, financing a range of properties from single-family homes to two- and four-unit residences. They have an average balance of $401,165, and moderate leverage of an original weighted average (WA) loan-to-value ratio of 70.8%. The loan count was significantly higher than several Morgan Stanley pools, going back to the MSRM 2024-NQM3, according to KBRA.
Like other pools of securitized mortgages located in the Los Angeles County area, any loans that exhibited material damage from the fires were removed before closing. In any case, S&P estimated that the exposure to those loans came to 5.07% by pool balance.
Where the exposure is significant is to property-focused investor loans underwritten to a debt service ratio driven by rental incomes. They make up 46.56% of the pool balance, S&P said.
In another collateral feature, the A1A, A1B, A2 and A3 certificates have step-up interest rates. This is the sum of the fixed coupon at closing and 1.0%, depending on the pool's net weighted average coupon. S&P thinks this step-up feature could motivate the majority holder of outstanding XS certificates to exercise the option to clean up the transaction.
KBRA's assigns AAA to the A1 through A1B notes; AA+ to the A2 notes; A to the A3 class; BBB to the M1s; BB to the B1s; BBB- to the B1A notes; BB to the B1B notes; and B to the B2 notes.
S&P gives AAA to the three A1 classes; AA- to the A2 notes; A- to the A3 class; and BBB- to the M1 tranche.
