A pool of seasoned home loans insured by the Federal Housing Authority will secure the $302.9 million Lakeview Trust 2022-EB03, a deal slated for early June.
Well over one thousand loans, some 1,713, comprise the collateral pool, according to a pre-sale report from Kroll Bond Rating Agency. Although the FHA insures the mortgages, which is a credit positive, they home loans are delinquent and are not likely to reestablish a track record of repayment, particularly if they languish in the delinquency phase.
“As the reperforming resolution path generally constitutes the highest income-generating and quickest recovery path, seasoned collateral generates lower and slower estimated principal and interest recovery percentages,” KBRA said. None of the loans in the underlying pool were current as of March 31, the pool’s cutoff date.
The success of the seasoned loan pool depends on the servicer’s expertise in handling prescriptive HUD deadlines and procedures for filing claims, KBRA notes. Lakeview also faces the potential risk that a servicer might be terminated or replaced in an environment that makes it more likely that a successor servicer might require higher fees.
Nomura Securities International and Performance Trust Capital Partners are initial note holders on the transaction, which will distribute interest to the non-principal only notes prior to an acceleration event, according to KBRA.
The notes benefit from an interest reserve account, which initially equals about 12 months of the interest amount due on class A through class B1, according to KBRA.
Single-family houses account for a large percentage, 69.8%, of the pool, followed by planned unit development, 17.9%. Condominiums, multifamily, manufactured homes and townhouses comprised the rest, each property type representing fewer than 5% of the pool, according to KBRA.
Balances, which range from $28,024 to $713,170, had current weighted average (WA) rates of 4.5% and remaining terms of 316 months. All properties are owner-occupied.
The pool is very diversified, with the top 10 loans accounting for 36.7% of the pool balance. The same applies geographically, as Chicago, Houston, New York, Dallas and Washington, D.C., each accounted for less than 10% of the pool.
