Packaging loans that have returned to performing status
Recent RMBS deals have securitized private-label mortgage loans from affluent borrowers with high FICO scores. Greater Ajax Corp. is offering investors exposure to a different flavor of borrowers: Those who have been delinquent on their mortgages and have relatively weak credit profiles.
The $156.5 million Amax Mortgage Loan Trust 2020-B is collateralized by 764 seasoned “re-performing” loans (RPLs), which are mortgages that were previously delinquent, as long as 90 days, but have recently been performing well.
Fitch Ratings notes in a presale report that the deal is anticipated to close Aug. 6. The loan pool comprises primarily seasoned RPLs, with 20% delinquent by 30 days as of the cutoff date, and 50.7% current but with delinquencies in the past 24 months, referred to as “dirty” current loans, Fitch says. The agency adds that the majority were able to make up missed payments and the current amount due in the following months and become contractually current.
Nearly 30% of the loans have been current over the past 24 months or longer, and 40.9% are contractually current for at least 12 months. Roughly 80% of the pool is now current, Fitch says, while 71% had a delinquency in the past 24 months. The vast majority of the mortgages, 86%, have been modified and 3.7% have experienced a prior credit event in the past seven years.
Fitch sees the pandemic and the resulting unemployment significantly impacting borrowers ability to make payments on time.
“To account for the cash flow disruptions, Fitch assumed deferred payments on a minimum of 40% of the pool for the first six months of the transaction at all rating categories, with a reversion to its standard delinquency and liquidation timing curve by month 10,” the raging agency says.
Nevertheless, relatively few borrowers have sought the payment forbearance program offered by servicer Gregory Funding.
“As of the cutoff date, 2.4% of the pool opted into a coronavirus relief plan,” Fitch says.
Borrowers in the pool have weak credit profiles, with an average FICO score of 629 coupled with relatively high leverage of 77.4% LTV, as calculated by Fitch. That compares to another non-agency RMBS deal currently in the market, JP Morgan Wealth Management Mortgage Trust 2020-ATR1, whose borrowers have a Fitch calculated FICO score of 776.