New Residential Mortgage Loan Trust will fund a $500 million securitization of two-year revolving portfolio of first-lien residential transition loans, its first of the year.
Pricing information was scant, on the deal, but DBRS Morningstar noted several features, credit strengths and enhancements to the notes. RTLs are known as fix-and0-flip mortgages, which are short-term loans that help investors buy and renovate small-balance commercial properties, usually within 12 to 36 months.
Rithm Capital is sponsoring the deal with Genesis Capital as originator, seller and servicer, the rating agency said. The latter provides financing to professional real estate developers who buy, build, renovate and hold projects, and who tend to have strong liquidity positions. Rithm Capital's own liquidity reserves reflects this. At the pool level, for instance, the loans have a weighted average (WA) minimum liquid reserve of $5 million, and at the loan level the pool has minimum liquid reserves of $1 million for sponsors without a FICO score.
NRMLT 2024-RLT1 will repay investors on a sequential basis, DBRS analysts said. The notes will be interest-only during the reinvestment period, with principal repayments applied afterward. The payment date is April 2026, and afterward the issuer has the option to redeem the outstanding notes at the redemption price, about equal to par plus interest and fees.
There is also a step-up feature. If the issuer does not redeem the notes by the payment date on October 2026, then the A1 and A2 tranches will step up by 1%, DBRS said. The servicer will not advance trust delinquent interest on any mortgage, but it is obligated to fund servicing advances, which include taxes, insurance premium and reasonable costs incurred while servicing and disposing properties.
In terms of the collateral pool, which has 251 loans, DBRS took note of several drivers. There are FICO minimums, liquid reserves, borrower experience, and limits on the sizes of large and heavy projects. The notes, as a result, have a non-zero WA FICO score of 737 and a loan-to-value ratio of 65.2%. Genesis Capital also has longstanding relationships with most of the borrowers, DBRS said.
Ground-up construction accounts for 40.1% of the asset pool, while bridge-only accounts for 24.5%.
DBRS says it assigns A to the A1 notes; and BBB, BB and B to the A2, M1 and M2 notes.
