PRPM is preparing to issue $210 million in residential mortgage-backed securities (RMBS), backed by a pool of home loans, a vast majority of which (87.5%), has a defect or an exception to guidelines that made the loans ineligible to stay in a government-sponsored entity (GSE) asset pool, according to FitchRatings.
Issued from the Balbec Capital's securitization shelf, PRPM will issue the notes through about seven tranches of classes A, M, B and CERT notes, all of which have a have a July 2054 legal final maturity date, Fitch analysts said. Credit enhancement levels on the notes range from 47.3% on the A1 notes to 5.00% on the class B notes. Also, all tranches, except the class B notes, have a 4.0% interest rate.
The mortgages have varying terms and they fund a range of property types, with fixed-, adjustable- and step-rate loans financing first liens on one- to four-family residential properties, planned unit developments (PUD), townhouses, and condominiums among the property types.
PRPM also has a diverse pool of contributing originators, according to Fitch. No single company contributes more than 15% to the pool, while SN Servicing will service 84.3% of the loans in the pool, and Fay Servicing will manage the rest, according to Fitch. Just 16% of the loans in the pool, less than 2%, are adjustable-rate mortgage (ARM) loans, which reference one- and six-month, and one-year Libor indices.
The pool has several non-prime, potentially negative, characteristics, even though some of them on the surface suggest strong fundamentals, Fitch noted. The borrowers, for instance, have strong credit profiles with a weighted average (WA) FICO score of 704, and a debt-to-income (DTI) ratio of 46.1%. Leverage is also moderate, with an original combined loan-to-value ratio (CLTV) of 81.3%, and a sustainable loan-to-value (LTV) ratio of 79.9%.
Self-employed borrowers comprise 23.1% of the pool, the rating agency said.
