As the U.S. economy gradually moves to a pandemic lockdown mode, several aspects of the residential mortgage borrowers is also returning to pre-COVID-19 levels, including the levels of self-employed borrowers in the Oceanview Mortgage Trust 2021-3, or OCMT 2021-3, which is scheduled to issue $351 million in notes.
Self-employed borrowers comprised 18.7% of the borrowers in the pool collateralizing the deal. For 2020 and 2021, the average combined percent of self-employed borrowers was 19.5%, according to Kroll Bond Rating Agency.
The self-employed professionals posted slightly weaker credit fundamentals, as they were more severely affected by the pandemic due to business closures, according to KBRA. For instance, the original FICO score for self-employed workers was 773, while full-time workers had a FICO score of 779. The original combined loan-to-value (CLTV) for self-employed workers on the underlying loans was 61.6%, compared with 69.3% for full-time workers.
In the overall pool and on a weighted average basis, OCMT 2021-3’s borrowers had significant, documented liquid reserves of $553,483 for prime jumbo loans. Compared with recent transactions, the borrowers were also shown to have high residual income.
All of the loans in the pool were qualified mortgages, which KBRA sees as a credit positive.
In line with the fact that jumbo mortgages are frequently originated in stated with high home prices, the pool has significant exposure to assets located in California. That state accounted for 22.6% of the pool balance, while Virginia, Texas, Florida and Maryland account for 10.3%, 9.8%, 7.2% and 4.7%, respectively.
Another aspect of jumbo loans is that the customers are often high net worth borrowers. Even though the underwriting terms of such loans are conservative, they present a risk to RMBS pools of jumbo loans, because a single loan might comprise a meaningful portion of the pool balance.
From a different perspective, the top five core-based statistical areas (CBSA) were Washington, D.C. (11%); Los Angeles (6.5%); San Francisco (5.4%) Dallas, Texas (4.0%), and Philadelphia (3.4%).
