Morgan Stanley is preparing to bring $419.2 million in residential mortgage-backed securities (RMBS) to market, in a seasoned securitization deal with a significant portion of non-prime mortgages.
While 81.4% of the pool was underwritten through debt service coverage ratio (DSCR) methods, and in the larger picture, 97.7% of the mortgages were written through alternative income documentation, primarily for investment properties, according to analysts at Kroll Bond Rating Agency. Morgan Stanley Residential Mortgage Loan Trust, series 2025-SPL1, will close in early October and has a final maturity of February 2065.
The rating agency also noted that the entire pool benefits from third-party due diligence, and 91.3% of the pool is considered clean current.
The deal will sell fixed-rate notes through a structure of class A, M and B notes, KBRA said. The class A notes benefit from credit enhancement levels ranging from 26.85% to 10.55%; and 6.30%, 4.20% and 1.25% on the M1, B1 and B2 notes, respectively, according to KBRA.
The structure will repay class A and mezzanine investors through a hybrid pro rata and sequential structure, with subordination from the class B notes. The deal also benefits from excess spread, around 0.15% initially, KBRA said.
Morgan Stanley Residential also includes a coupon rate step up for classes A1 through B1, beginning in October 2029, KBRA said.
The collateral pool, 1,158 includes loans that were in a previous securitization, the rating agency said. All are first lien and have an average balance of $361,870. On a weighted average (WA) basis, the pool has a coupon of 4.84%, an original FICO score of 745, and an original loan-to-value (LTV) ratio of 70.2%, and a debt-to-income ratio of 39.7%.
Borrowers have a non-zero weighted average annual income of $223,728, liquid reserves of $301,046 and DSCR of 1.33%, KBRA said.
KBRA assigns AAA to the A1 notes; AA to the A2; and A- to the A3 notes.
