PennyMac portfolio selling $346.6 million in prime mortgages

A pool of prime residential mortgages, primarily composed of investment properties and second home loans, will secure $346.6 million in securitized bonds from sponsor PennyMac Mortgage Investment Trust.

The deal, known as PMTLT 2025-INV5, is secured by agency-eligible loans that are collateralized by 945 fixed-rate, first-lien mortgages, most of which 81.2%, are investment property, according to Kroll Bond Rating Agency. That's a potential credit liability, because those types of properties are more likely to default.

PMTLT 2025-INV5's offers coupon rates of 5.5% on the senior notes that will repay investors sequentially, plus one senior support tranche, according to Asset Securitization Report's deal database, which is expected to close on May 14. The transaction's senior, interest-only tranches, which are also initially exchangeable, pay a coupon of 0.50%, according to KBRA.

The subordinate notes, which will repay investors sequentially, are expected to pay coupons of 6.8%. There is also a super senior tranche of exchangeable notes that pay a coupon of 6.5%, KBRA said.

KBRA notes that BofA Securities is the structuring lead and joint bookrunner, while Barclays Capital. Citigroup Global Markets, Goldman Sachs and Nomura Securities are co-lead managers and joint bookrunners. Santander US Capital Markets joins as an initial note purchaser.

The super senior notes, which repay investors sequentially, benefit from credit enhancement representing 15.0% of the pool balance. Also, KBRA assigned AAA to those notes.

KBRA assigns ratings of AAA to the super senior notes that pay sequentially; AA+ to the senior support and senior notes; AAA to the AX6 through the AX31 tranche; AA+ to the AX30 and AX31; AA- to the B1 notes; A- to the B2 notes; BBB- to the B3 class; BB+ to the B4 notes and B+ to the B5 notes.

The collateral pool is of high quality, as is the borrower profile, according to KBRA. On average, the loans have a balance of $366,797, and on a weighted average (WA) basis, the loans have a coupon of 7.18%.

Also, the loans have a FICO score of 774, an original loan-to-value (LTV) ratio of 74.5%, and a debt-to-income (DTI) ratio of 36.6%.

Almost one quarter of the borrowers in the pool, 23.2%, are self-employed. Overall, borrowers have a WA annual income of $332,635, with liquid reserves of $439,186.