Nomura Corporate Funding is preparing to issue $365 million in notes secured by seasoned performing and reperforming, first-lien residential mortgages through the NLT 2023-1 Trust.
This is the first time in two years that any entity under the NLT name has issued bonds to investors, according to the Asset Securitization Report's deal database.
The last time that any NLT trust issued notes to investors, it sold $236 million to investors under the NLT 2021-INV3, which priced on Nov. 15, 2021.
Nomura Securities International is the manager and initial note purchaser on the deal, according to ASR and DBRS Morningstar. With a December 22 expected closing date, the trust will issue notes through about 10 classes of notes, six of which will get ratings from DBRS. The notes all have a stated final maturity date of October 2062, according to the rating agency. Revenue from 547 mortgage loans will back the repayment of notes.
The portfolio has about 40 months of seasoning, although the age of the loans ranging from three to 358 months. A majority of the loans, some 73.1%, had disqualifying deficiencies related to origination or documentation guidelines, which prevented Fannie Mae or Freddie Mac from purchasing the loans, according to DBRS. Having been put back to the sellers, NWL and NNPL Trust Series 2012-1, the loans were bundled and put into the current trust.
As of the October 31 cutoff date, Fay Servicing is the servicer for the transaction, according to DBRS.
Although Fannie and Freddie did not pick up the loans, they still possess certain credit merits, according to DBRS. The loan-to-value ratios and FICO scores are generally robust, according to the rating agency. Another is that the collateral also went through a third-party due-diligence review. With the approximate 40 months of seasoning, the loans suggest that borrowers have demonstrated the ability to repay the mortgage loans and the willingness to stay in their homes throughout various economic cycles.
Other challenges exist, though. For one, the servicer will not advance any scheduled principal and interest on delinquent mortgages. This characteristic will most likely result in lower loss severities to the transaction, because advanced principal and interest will not have to be reimbursed from the trust after mortgages are liquidated, yet it will increase the possibility of periodic interest shortfalls to noteholders, DBRS said.
The rating agency says it expects to assign ratings of 'AAA', 'AA' and 'A' to classes A1, A2 and A3, respectively. Classes M1, B1 and B2 will receive ratings of 'BBB', 'BB' and 'B'.
