PRPM 2023-NQM3 Trust has issued residential mortgage pass-through certificates which are supported by 516 loans with a balance of $236.4 million. This was the sixth PRPM transaction in 2023.
Nexera Holding — doing business as Newfi Lending — originated 23% of the loans, with other originators each holding less than 10%, according to DBRS Morningstar. Fitch Ratings assesses Newfi Lending as an 'Average' originator.
Fay Servicing, whom Fitch rates as 'RSS2'/Stable, will service 100% of the loans in the pool. Barclays was the lead underwriter, and U.S. Bank is the trustee and securities administrator.
According to Asset Securitization Report's deal database, the deal closed on Dec. 22.
Fitch views the home price values of the pool as 9.1% above a long-term sustainable level. It views the long-term sustainable valuation of the assets in this portfolio as equaling $299 million.
Fitch says the collateral consists of fixed- and adjustable-rate loans with maturities of up to 40 years. The pool comprises 85.5%, 30-year fully amortizing loans and 10.7%, 30- and 40-year loans with a five- and 10-year interest-only period. The pool is seasoned at about 11 months in aggregate, Fitch says.
Borrowers in the pool have relatively strong credit profiles with a 743 weighted average (WA) FICO score and a 42.3% debt-to-income ratio, both as determined by Fitch. (Their WA FICO is 747, according to transactions documents.)
The borrowers also have moderate leverage, with an original combined loan-to-value (CLTV) ratio of 74.9%, translating to a Fitch-calculated sustainable LTV ratio of 79.1%.
Of the pool, 98 loans (20.3%) are dirty current, meaning the loans experienced a prior delinquency in the past 24 months but are now performing, Fitch says. These loans were seasoned on average 15 months and consisted primarily of non-full documentation programs.
Fitch says the transaction is highly comparable to other recently issued nonqualified mortgage transactions in both collateral composition and the transaction structure. Its projected asset loss for the transaction's credit enhancement is in line with that of other non-QM transactions with similar collateral attributes and is 100bps higher than the previously Fitch-rated PRPM 2023-NQM2 transaction's loss figure. The balance of PRPM 2023-NQM2's collateral pool was $276.8 million.
Fitch says that, compared to PRPM 2023-NQM2, the transaction has a slightly worse leverage/equity profile with a CLTV of 74.9% versus 73.2%, and a significantly higher dirty current percentage at 20.4% versus 7.6% in the prior deal. However, the interest-only percentage is lower at 10.6% versus 11.7%, and the WA FICO (as determined by Fitch) is higher at 743 versus 740.
DBRS Morningstar rated the class A-1 notes at AAA, class A-2 at AA (high), class A-3 at A (high), class M-1 at BBB (high), class B-1 at BB (high), and class B-2 at B (high).
Fitch expects to rate the class A-1 notes as AAA, the A-2 notes as AA, the A-3 notes as A, the M-1 notes as BBB, the B-1 notes as BB, and the B-2 notes as B-.
Neither agency rated the class B-3, class A-IO-S, XS, P, or R certificates.
