A pool of first-lien, fixed-rate prime residential mortgages will collateralize $324.2 million in mortgage-backed securities coming to investors through the PMT Loan Trust 2025-J5.
Notes will be issued through a series of class A and B notes and repay investors through shifting-interest structure. There is a senior enhancement floor and a locked-out class to address tail risk and retain credit support, according to analysts at Morningstar DBRS.
BofA Securities, Citigroup Global Markets, J.P. Morgan Securities and Morgan Stanley are the notes' initial purchasers, DBRS said.
The underlying 258 jumbo prime mortgages are PennyMac loans, which have been included in many prime securitizations on third-party platforms. Performance history on the PMTLT shelf, however, is limited, with this being only the fifth such securitization of mortgages from the platform, according to DBRS.
The deal does have a representation and warranties framework, but it appears to be limited compared with traditional lifetime R&W standards that DBRS has observed. Despite that, the entire pool has experienced third-party due diligence, which reduces the risk of future violations.
Any loan that becomes 120 days delinquent will be subject to a breach review, DBRS said. Also R&Ws related to factors such as underwriting, property valuation, fraud, and occupancy are only allowed to sunset within the first three years if the assets meet certain performance tests.
There is also a mechanism that limits payment of principal and interest on certain assets. Mortgages that are delinquent by 120 days will be shut out of such payments until such assets are deemed unrecoverable.
On the underlying pool, most of the loans, 88.5%, are secured by primary residences. They have an average loan balance of $1.2 billion and a weighted average (WA) coupon of 6.4%, and an original cumulative loan-to-value ratio of 71.4%.
Also on a WA basis, borrowers have a FICO score of 770 and a debt-to-income ratio of 35.9%, DBRS said.
DBRS assigned ratings on the notes range from (p) AAA (sf) on the A1 through A22 notes to (P) B (sf) on the B5 notes.
