Another non-prime residential mortgage-backed securities (RMBS) deal is coming to the securitization market, as Rithm Capital prepares to sponsor the $272.4 million New Residential Mortgage Loan Trust 2024-NQM3.
Known as NRMLT 2024-NQM3, the deal will sell notes to investors through about nine tranches of class A, M and B notes, according to rating agencies Kroll Bond Rating Agency and Fitch Ratings. All the notes have a November 2064 final maturity date, according to Fitch.
The notes will repay investors through a modified sequential-payment structure, where the senior notes will repay on a pro rata basis. Otherwise, the principal classes will repay principal until the balance in the senior classes are reduced to zero.
The notes benefit from credit enhancement levels of 34.75%, 24.75%, 17.00%, 9.40%, 6.40%, 4.55% and 2.90% to the A-1A, A-1B, A-2, A-3, M-1, B-1 and B-2, respectively, according to Fitch.
A pool of 538 residential mortgages will collateralize the bonds, according to KBRA.
NewRez originated the loans using alternative documentation for and will service them, according to KBRA. Most of the underlying loans, 76.8%, were underwritten using bank statements collecting 12-23 months of records, and tax returns and W-2 statements looking back more than 24 months.
On average, the loans have an average balance of $506,439. On a weighted average (WA) basis, the collateral has a FICO score of 750, and an original loan-to-value ratio of 72.0%.
Fitch says 68.2% of loans were extended to borrowers who maintain a primary residence, and 31.8% of the loans are on investor properties, Fitch said.
In one potential drawback, the deal features a step-up coupon. Should the transaction come to a payment date when the mortgages' principal balance is less than or equal to 20% of the balance as of the cutoff date, then on the next payment date the senior notes feature a 100 basis-point step-up, according to Fitch.
But the deal has some credit positives. The entire collateral pool received third-party due diligence, resulting in overall strong origination practices, with no material exceptions, Fitch said.
Fitch assigns AAA to the A-1A and A-1B notes; AA- to the A2 notes; A- to the A3 notes; BBB- to the M1 tranche; and BB- and B- to the B1 and B2 tranches, respectively.
KBRA assigns AAA to the A1A through A1 notes; AA to the A2 tranche; A+ to the A3 tranche; BBB+ to the M1 class; and BBB- and BB- to the B1 and B2 notes, respectively.
