Reverse mortgage provider PHH is preparing to sell $426.9 million in securitized notes to investors through Onity Loan Investment Trust 2025-HB2 infusing the business with new capital.
Onity 2025-HB2 will sell the notes, backed by a pool of 1,348 home equity conversion mortgages (HECM) that have about $413.3 million in unpaid principal balance, according to Morningstar DBRS. The pool also includes some real estate owned (REO) assets.
Seven tranches, composed of one class A tranche and six class M pieces, will sell the notes to investors, the rating agency said. The class A notes, with a balance of $263.4 million, contain the bulk of the deal, according to the DBRS.
All the notes, which are expected to pay a rate of 3.00%, have a November 2038 stated final maturity date, according to the rating agency.
Deutsche Bank Securities is the manager on the deal, which is expected to close on December 11, according to Asset Securitization Report's deal database.
Onity Loan Investment follows a sequential repayment structure, so no subordinate notes—the class M notes, essentially—will receive any principal payments until the senior class A notes have been paid down to zero, DBRS said.
Adjustable-rate mortgages account for most of the asset, by principal balance, or 68.0%.
According to the capital structure, Onity Loan's class A notes benefit from credit enhancement representing 36.3% of its outstanding notes. Among the class M notes, the M1 tranche benefits from 24.5% in credit enhancement and the M4 notes benefit from 1.4% in enhancement.
Typically offered to borrowers 62 years and older, reverse mortgages pay out home equity either in a lump sum or a stream of payments. Borrowers do not have to repay principal or interest until a maturity event occurs, including the sale of the property, the death of the borrower or if the borrower stops living at the mortgaged property for a year.
Home equity is being tapped from a range of residential properties, including single-family, condominiums, multifamily, townhomes, and planned unit developments, DBRS said.
Ratings range from (P) AAA (sf) to the class A notes to (P) B (sf) on the class M6 notes.
