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Neuberger Berman, PIMCO add $752M to non-QM RMBS pipeline

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Private funds operated by Neuberger Berman Investment Advisors and PIMCO have launched non-qualified mortgage securitizations to close before year’s end.

Neuberger Berman is sponsoring the $411.1 million Homeward Opportunities Fund (HOF) I Trust 2019-3, which consists primarily of non-qualified prime and non-prime mortgage loans for single-family and two- to four-unit residential properties, planned-unit developments, and condominiums.

BRAVO Residential Funding Trust 2019-NQM2 is backed by a Pacific Investment Manage Co. private fund, in a transaction featuring $341.1 million in notes secured by 742 loans.

The two deals continue a fourth-quarter surge of private-label RMBS deals that have hit the securitization market. According to data from Finsight, 25 nonagency, performing loan transactions with a deal volume of $8.37 billion have priced since Oct. 1, already topping the volume of each of the three prior quarters this year.

(HOF) I Trust 2019-3 mostly includes loans that were originated either by Sprout Mortgage Corp. (67.19% of the pool by balance) and 5th Street Capital (30.33%), before being acquired by Neuberger Berman.

The pool consists of 590 loans, all with 30- to 40-year original terms to maturity, and are seasoned an average of four months. The weighted average FICO of the pool is 723, with 85.9% of the loans underwritten for owner-occupied, primary residences. The average loan balance is over $696,000 with a WA current LTV of 75.2%, the highest of Neuberger Berman deals dating to early 2018.

In a presale report, S&P Global stated the collateral pool is “slightly weaker” than prior Neuberger Berman non-QM deals because of the higher loss coverage levels for the loss. The increase is the loss coverage levels is driven mostly by a higher weighted average original combined loan-to-value ratio of 75.17%, compared to prior Neuberger Berman pools.

Unlike prior Neuberger Berman deals, the sponsor has the option to repurchase any 90-day delinquent loan from the pool, or take on a foreclosed REO (real estate owned) property in lieu of a mortgage loan. In addition, Neuberger Berman has extended the optional redemption of the deal to three years, compared to two years in its prior HOF transaction.

The loans are managed either by Specialized Loan Servicing (53.78%) and Fay Servicing (46.22%).

The capital stack includes a Class A-1 tranche totaling $263.5 million, and carries early AAA ratings from S&P Global Ratings and Fitch Ratings.

BRAVO Residential Funding Trust

PIMCO’s $341.1 million is its second non-QM transaction this year on the BRAVO shelf.

The capital stack includes a Class A-1 tranche of $255.5 million in notes which have preliminary triple-A ratings from Fitch Ratings.

According to a presale report, 41% of the pool consists of loans previously securitized in 2016 and 2017 COLT transactions sponsored by Caliber Home Loans that have since been called. About 64% of the pool is designated non-qualified; other assets include higher-priced QM loans (11%) and a small sliver of safe harbor qualified mortgage loans (2%). The remaining 23% of the loans are investor loans not subject to the Consumer Financial Protection Bureau’s ability-to-repay rules.

The deal has a WA FICO of 719, and a WA mark-to-market combined loan-to-value ratio of 72.2%. The pool consists mainly of adjustable-rate mortgages, many with high balances: 56 loans are over $1 million, with the largest being 2.83 million. Most were originated through a non-retail channel.

Seventy percent of the loans are for single-family homes.

The pool is seasoned 18 months. Less than half are fully documented loans; the remainder relied on alternative income documentation such as bank statements, CPA letters, profit and loss statements, property cash flows and asset depletion.

Five percent of the pool’s loan balances are owed by non-permanent residents.

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RMBS Private-label