A pool of performing and non-performing home equity conversion mortgages, essentially reverse mortgages and real estate-owned (REO) assets, secures $700 million in securitized notes from the Finance of America HECM Buyout 2024-HB1 trust.
All the notes have a stated maturity of October 2034, with coupons on the A1A and A1B notes paying 4.0%; the M1 notes paying 5.0%; and the M2 through M5 notes paying 6.0%, according to ratings from Moody's Ratings.
As for credit enhancement in the collateral pool, all the assets benefit from Federal Housing Administration insurance, which is a substantial amount of protection. The deal's capital structure also includes a sequential payment structure and the subordination of servicer advances, if there is no servicer termination event, Moody's said.
FAHB 2024-HB1 will issue notes through seven classes of notes, with the A1 tranche containing a majority (55.0%) of the assets, according to Moody's.
Asset Securitization Report's deal database finds that the notes pay yields ranging from 5.3% on the A1A notes to 12.6% on the M5 tranche, and the notes are priced to the three-month I-curve. Barclays, Nomura Securities International and Raymond James & Associates are managers on the deal.
Moody's assigns Ass ratings to the A1A notes, its analysts said.
Of the 2,302 loans in the pool, 653 of them, comprising 29.65% of the total unpaid balance are performing, according to Morningstar DBRS. As for the remaining 1,649 nonperforming loans, about 30.10% were referred for foreclosure, while 4.97% are in bankruptcy status, 13.97% are called due and payable after recent maturity, 7.61% are real-estate owned and the remaining 0.71% are in default, DBRS said.
DBRS also noted that 1,344 of them (representing 61.53% of the pool balance) have a fixed rate.
New York, California and Texas account for most of the loans, with 23.06%, 10.08% and 9.51%, respectively.
DBRS notes that underlying loans extended to borrowers in Puerto Rico account for 6.91% of the pool balance in FAHB 2024-HB1. Most of the comparison pools for the deal have had high concentrations in Puerto Rico and have experienced lagging cash flow and produced higher losses, the rating agency said.
DBRS assigns AAA to the A1A and A1B tranches; AA to the M1 tranche; and A to the M2 tranche. The M3, M4 and M5 notes received BBB, BB and BB notes, respectively.
