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PIMCO’s non-QM securitization includes called collateral

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PIMCO is resecuritizing a large swathe of mostly non-qualified home loans that were previously bundled in 2016-2017 mortgage-backed securities, according to presale reports.

The $324.4 million Bravo Residential Funding Trust 2019-NQM1 transaction has 724 loans, including many large-balance mortgages originated in California. The loans are seasoned an average of 36.6 months, with most (62.9%) having been acquired from Caliber Home Loans.

More than 80% were previously pooled in asset-backed transactions where the notes have been paid down, but the pool also newly originated, state presale reports from Morningstar Credit Ratings and Fitch Ratings.

About 69% of the mortgages are considered non-qualified mortgages under Consumer Financial Protection Bureau-defined guidelines for ability-to-pay and truth-in-lending/disclosure requirements. Those standards are designed to limit high-risk loan products and features, and provide lenders with safe-harbor legal protections against borrower claims.

The 724 loans have an average balance of $447,773, and are mostly amortizing (96% of the collateral loan balance). They include fixed-rate, adjustable-rate, and step-rate terms, and carry an average coupon of 6.2%. More than 50% of the loans were originated in California.

Presale reports show that 87.9% of the loan balances are tied to mortgages for single-family residences (including planned unit developments). The remainder are mortgages for condominiums, two-to-four unit dwellings, co-ops and townhomes.

Borrowers have significant equity in the homes, with a weighted average loan-to-value ratio of 73.4%.

The average borrower FICO is 714, “slightly better” than typical non-QM deals, stated Morningstar. But approximately 17.6% of the loans have a prior delinquency, with about 3.8% of the loans currently delinquent at the time of the cut-off period for the pool. Another 13.8% are considered "dirty current," meaning they have a recent delinquency or an incomplete paystring, according to Fitch.

There are a large proportion of large-balance loans in the pool, with 8.7% of the total loans accounting for about 25% of the entire pool balance, according to Morningstar.

The capital stack offering will include 11 classes of notes totaling $324.4 million, including the $257.4 million Class A-1 notes carrying preliminary AAA ratings from Morningstar and Fitch. The A-1 notes have 20.6% credit support.

Loans were aggregated by a private fund managed by the $1.6 trillion asset PIMCO, or Pacific Investment Management Company. The loans are serviced by Rushmore Loan Management Services LLC, Sterling Bank and Trust and Select Portfolio Servicing.

PIMCO earlier this year securitized a collection of 1,311 seasoned mortgages it had acquired for Bravo Residential Funding Trust 2019-1, which closed in April.

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