Morgan Stanley Residential Mortgage Loan Trust is preparing to sell $279.2 million in residential mortgage-backed securities (MBS), another non-qualified mortgage loan deal. The transaction is also secured by all first-lien loans.
The bonds are largely secured by mortgages on primary and secondary homes, while a significant amount, 47.1%, are funding investor properties, according to Fitch Ratings. The structure offers investors the notes through about nine classes of class A, M, and B, all of which have a final scheduled distribution date of October 2069.
All the notes in MSRM 2024-NQM5 are fixed rate. Senior classes A1A, A1B, A2 and A3 enjoy credit enhancement levels of 31.4%, 21.4%, 21.5% and 17.6%, respectively, according to Fitch. The M1 tranche has 8.6% in credit enhancement. After that, the B1A, B1B, B2 and B3 benefit from 3.8%, 6.0%, 3.2% and 2.5%, respectively.
Notes will replay investors through a modified sequential structure. Class A certificates will repay principal on a prop rata basis, and mezzanine and subordinate certificates are shut out of that repayment until all the principal in the class A notes is reduced to zero.
The transaction also benefits from excess spread, but that could be reduced on or after the January 2029 distribution date, Fitch said.
Underwriting for the deal appears to have shifted to alternative documentation compared with the MSRM 2024-NQM4 deal, according to Kroll Bond Rating Agency. It accounts for 37.9% of the pool balance, compared with 24.6% on the 2024-NQM4 deal, KBRA said. Debt service coverage ratio, for investors properties, accounted for 31.9% of the pool, down from 43.8% on the previous deal. Traditional, full-doc underwriting also accounted for a smaller percentage of the pool balance, down from 30.4% on the 2024-NQM4 deal.
Self-employed borrowers account for 41.3% of the loan pool, KBRA said.
MSRM-NQM5 is also geographically diverse, with California mortgages accounting for 24% of the pool balance. Florida and Texas follow with 14.4% and 9.3% of the mortgages, according to KBRA.
HomeXpress Mortgage originated 12.8% of the loans, with Shellpoint Mortgage Servicing on the transaction as servicer.
Fitch assigns AAA to the A1A and A1B notes; AA- to the A2 notes; A- to the A3 notes; and BBB- to the M1 tranche.
KBRA assigns AAA to the A1 through A1B notes; AA to the A2 notes; A to the A3 notes; BBB+ to the M1 notes; BB to the B1 notes; BBB- to the B1A tranche and BB and B to the B1A and B1B tranches.
