Is New Residential running out of rights to exercise “clean up calls” on older, private-label mortgage securitizations?

The real estate investment trust has become a regular issuer of mortgage bonds, relying on an unusual strategy of acquiring legacy loans from various securitization trusts that have become uneconomical to service because so much of the principal has been paid down. It bundles the remaining loans into collateral for new bonds.

But the collateral for New Residential’s latest offering of mortgage bonds includes some whole loans it has purchased, in addition to loans acquired through clean-up calls.  

New Residential Mortgage Loan Trust 2017-2 is backed by 6,106 loans with a total principal balance of $665,135,131, according to DBRS.

Among the strengths of the deal, according to the credit rating agency, is the fact that the loans are of better credit quality than other pools of rehabilitated loans it has analyzed. The loans are significantly seasoned with a weighted-average age of 166 months and an especially low weighted average current loan-to-value ratio of 37.9%. Just over  97% of the pool is current, 1.9% is 30 days delinquent, and 1.0% is in bankruptcy.

Approximately 83.3% and 89.7% of the mortgage loans have been making timely payments for the past 24 months and 12 months, respectively. Just 10.8% of the loans have been modified, and in 72.1% of those cases, the modification happened more than two years ago.

As a result of the seasoning of the collateral, none of the loans are subject to the Consumer Financial Protection Bureau Ability-to-Repay/Qualified Mortgage rules.

Reperforming loans that New Residential securitizes tend to prepay faster than other portfolios that DBRS has preferred, as the borrower's relatively clean payment history allows them to refinance in order to lower their interest rates and tap equity built up in their properties.

DBRS expects to assign AAA ratings to the senior trances of notes to be issued in the deal.

The majority of the pool (97.4%) is serviced by Nationstar Mortgage, and 2.6% by Ocwen Loan Servicing. Nationstar will also act as the master servicer and the special servicer.

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