PennyMac is set to plot its first prime RMBS issue, the $550.46 million PMT Loan Trust 2013-J1.
The jumbo prime structure has been assigned preliminary ratings by Kroll Bond Ratings Agency. The structure will offer investors $507.8 million of ‘AAA’-rated class A notes; $14.03 million of ‘AA’ rated, class B notes; $9.63 million of ‘A’-rated, class B-2 notes; $5.50 million of ‘BBB’-rated class B-3 notes; and $5,78 million of ‘BB’-rated, class B-4 notes. KBRA did note rate the $7.70 million class B-5 notes structured in the deal.
Merrill Lynch, Pierce, Fenner & Smith Incorporated is lead manager on the deal, according the KBRA presale.
The mortgage pool backing PMT 2013-J1 are all 30-year fully amortizing fixed-rate mortgages (FRMs). There are no interest-only loans in the pool. The pool is characterized by substantial borrower equity in each mortgaged property, as evidenced by a weighted average (WA) loan-to-value (LTV) ratio of 70% and a combined LTV of 71%. The WA credit score of the mortgage pool is 770.
One concern that KBRA had was the lack of performance history the issuer has in the space. PMC has no securitization performance history for this asset class, as a result, KBRA said in the presale report, that it has met has met with senior members of PMC’s management team and reviewed its origination and aggregation processes, generally focusing on loan sourcing, the procedures for approving and monitoring loan sellers, underwriting guidelines and the re-underwriting process.
Another concern is that all loans in PMT 2013-J1 will be serviced by PennyMac Loan Services, LLC and the transaction will not have the benefit of a master servicer.
“In most RMBS transactions, upon a servicer default a master servicer generally steps in to facilitate the continuity of critical servicing functions such as loss mitigation and advancing of principal and interest ,” explained analysts at KBRA.
To mitigate concerns regarding the lack of a master servicer, Citibank, N.A as fiscal agent on the deal, will be required to make any P&I advance due if the servicer fails to fund the advance.