Wells Fargo is poised to raise another $451.9 million in prime residential mortgage backed securities (RMBS), issuing notes that will be secured by a pool of payments from prime, fixed-rate mortgage loans extended to investors.
Some 1,580 prime fixed-rate mortgage loans, with a total balance of about $475.8 million, collateralize the deal, known as the Wells Fargo Mortgage Backed Securities 2022-INV1 Trust (WFMBS 2022-INV1), according to a FitchRatings presale report issued on Monday.
Wells Fargo Banks, is the sponsor, seller and originator on the deal, the third transaction secured by non-owner occupied properties to be issued from the WFMBS shelf Fitch said.
The master servicer securities administrator is Computershare Trust Company.
WFMBS 2022-INV1 will issue 17 classes of notes slated to have a legal final maturity date of March 2052. The preliminary ratings from Fitch range from ‘AAA’ to ‘B’ with one unrated class, the B-6. The largest tranche is $216.9 million with a credit enhancement of 20% and a 3% interest rate. Fitch expects to assign ‘AAA’ to 11 of the notes.
The pool has 25- and 30-year fixed-rate loans to borrowers with weighted average FICO scores of 761 and 37% debt-to-income ratios. More than 90% of the loans were originated directly by a correspondent or through a retail channel, Fitch said.
Fitch did, however, note a couple of drawbacks to the transaction. Home price values of the underlying pool are more than 10% above a long-term sustainable level. The sustainable level from a national point of view is 9.2%.
America’s 18.9% home price increase, encouraged by a supply/demand imbalance, new buyers and lower mortgage rates, have created underlying fundamentals that are not keeping pace with the price, the report said.
The average loan balance is $301,112. California accounts for the state with the highest concentration of loans in the pool, while Los Angeles has the highest concentration by metro area.
Fitch considers the transaction to be of very low operational risk, because of Wells Fargo’s experience in the residential mortgage industry.
