RCKT Mortgage Trust 2022-4 is preparing to issue $337.9 million in mortgage-backed securities (MBS), supported by a pool of home loans less frequently seen these days—all qualified mortgages extended to prime borrowers with high median incomes occupying the properties they will buy.
Morgan Stanley and Bank of America Securities are initial note purchasers on the deal, which will issue notes through a senior-subordinate, shifting interest payment structure, according to Kroll Bond Rating Agency.
Woodward Capital Management is sponsoring the deal, for which Rocket Mortgage originated the 330 mortgages in the collateral pool. Rocket Mortgages is also the servicer.
Borrowers in the pool are well off, by KBRA’s assessment. Aside from a median annual income of $315,283, they typically have non-zero weighted average (WA) asset reserves of $406,325 and high residual income help shore up continued payments to the underlying mortgages, which should benefit the notes.
The entire underlying pool of mortgages benefited from full documentation, according to KBRA. Borrowers had a WA original credit score of 757 and a WA debt-to-income ratio of 34.3%. They also had a significant amount of equity in the property, as the 76.0% WA loan-to-value ratio of the mortgages suggests.
Aside from a collateral pool that benefits from highly qualified borrowers, delinquency and cumulative loss triggers also support continued note payments to RCKT Mortgage, 2022-4, according to KBRA.
KBRA expects to assign ‘AAA’ ratings throughout much of the deal, from the $172.3 million, super senior, initial exchangeable notes to the $57.4 million, A-16 class of notes. Subordinate, initial exchangeable notes are expected to garner ratings of ‘AA+’ and ‘A+’, and the subordinate notes are expected to be rated ‘BBB+’ to ‘B+’, according to KBRA.
The mortgages are fixed rate, KBRA notes. While many aspects of the deal are uniform, the purposes of the loans vary a little. A majority of the loans, 64.6% are for home purchases, while 27.9% are for cash-out financing, and 7.5% of the mortgage proceeds will be used for refinancing, KBRA said.
Geographically speaking, California accounts for 21.2% of the loans in the pool by balance, followed by Florida (16.4%), Texas (8.1%), Arizona (4.3%) and Colorado (4.2%) to round out the top five states represented. The pool is more highly diversified by metro area, with Los Angeles representing 6.1% of the pool, according KBRA.
