A portfolio of first-lien seasoned residential mortgages will serve as collateral for a $424.8 million mortgage-backed securities (MBS) deal from the PRET 2025-RPL1 Trust.
The deal will issue the securities through nine tranches of class A, M and B notes and has an expected closing date of January 28, according to Morningstar | DBRS. This is the fifth rated securitization of these assets from the sponsor, Nomura Corporate Funding, and the third issuance from the PRET shelf, DBRS said.
The notes have a stated final maturity date of July 2069 and will repay investors sequentially. Proceeds from principal can be used to make up for shortfalls to the notes, but DBRS points out that those shortfalls on the class A2 and subordinate bonds will not be paid from principal proceeds until the senior classes are retired.
Among the deal's strengths, the mortgage pool has a combined loan-to-value ratio of 52.8%, although DBRS said after it applies penalties the pool has a current CLTV of 58.7%.
There are also some key challenges. The deal uses a system of 17 representations and warranties, which is considered weaker, DBRS said. The servicer, Selene Finance, will not advance any scheduled principal and interest on delinquent mortgages. Advanced principal and interest will not have to be reimbursed from the Trust, after mortgages are liquidated, resulting in lower loss severities to the transaction, DBRS said. But that could also increase periodic shortfalls to noteholders, the rating agency said.
The mortgage pool consists of 2,151 loans, with an average loan balance of $197,524. On a weighted average (WA) basis, the pool has a coupon of 4.9%, a FICO score of 658 and an original LTV of 77.8%.
A vast majority of the mortgages are non-qualified (76.1%) and financed single-family houses (84.6%).
DBRS assigned AAA to the A1 notes; AA to the A2 and A3 classes; A to the A4 notes; BBB to the A5 notes; A to the M1 notes; BBB to the M2 notes; BB to the B1 notes; and B to the B2 tranche.
