The Morgan Stanley Residential Mortgage Loan Trust is preparing to come to market with $356 million in mortgages that mostly financed single-family houses and planned unit developments.
Notes will be issued from a senior-subordinate, shifting interest payment structure, in a deal where Morgan Stanley will act as the manager, according to a Kroll Bond Rating Agency pre-sale report. It's another deal where the Morgan Stanley Residential Mortgage program acquired the loans from various sellers in the bank's prime-jumbo aggregation process, according to Fitch Ratings.
Fitch notes that some 360 prime-quality, fixed-rate loans are in the collateral pool. The entire pool adhered to full documentation origination and they qualify as safe-harbor qualified mortgage (SHQM) or SHQM average prime offer rate loans. In another credit positive for the deal, borrowers have strong credit profiles and weighted average (WA) FICO scores of 764.
A strong majority of the loans, 61.9%, were originated through the seller's retail channels, another plus according to Fitch. KBRA notes that Rocket Mortgage is the largest originator, at 18.5%. CrossCountry Mortgage and UWM account for 15.0% and 10.2%, respectively.
In the deal's shifting-interest structure the subordinate classes receive only scheduled principal, Fitch says. They won't receive any unscheduled principal or prepayments for five years, a relatively short shutout period considering that all of the notes have a legal final maturity of February 2053, according to information in the Fitch report.
The pool is considered to be geographically diverse, although the top three states do account for 57.9% of the entire pool, according to KBRA information.
As for the state breakdown, California accounts for 38.1% of the loan pool, the largest share. Florida follows with another 14.2% percent and Arizona accounts for 5.6% of the pool, according to KRBA.
Fitch intends to assign ratings of 'AAA' to most of the notes in the deal, classes A-1-IO through A-8-IO; 'AA' and 'A' on the B-1 and B-2 notes; and 'BBB', 'BB' and 'B' on the B-3, B-4 and B-5 notes. KBRA, meanwhile, says it will assign the same 'AAA' ratings on classes A-1-IO through A-8-IO. The B-1 and B-2 notes will receive 'AA-' and 'A-', respectively and the B-3, B-4 and B-5 notes will receive 'BBB', 'BB-' and 'B-', respectively.
