Sequoia Mortgage Trust, sometimes known as the Redwood Trust, is issuing $672 million in residential mortgage-backed securities (RMBS), opening the year with a loan pool that has a better credit profile than the platform's previous deal.
Compared with the previous transaction, the SEMT 2025-13, the series 2026-1 notes are secured by loans with a lower debt-to-income (DTI) ratio of 35.7%, a lower loan-to-value (LTV) 71.8%, and a slightly higher weighted average FICO score of 777, according to analysts at Fitch Ratings.
Those positive characteristics were offset, however, by the fact that loans on single-family homes in the pool dropped by 0.5%, and the percentage of loans that received due diligence dropped by 0.4%, according to Fitch Ratings.
Some 546 prime jumbo mortgages are in the pool, which are fixed-rate and amortizing with terms of 20, 25 and 30-year maturities, and were originated under qualified mortgage standards, according to analysts at Kroll Bond Rating Agency. Virtually the entire pool of mortgages benefited from third-party due diligence, KBRA said.
The rating agencies say the super senior notes, A9, A12, A18 and A26F, benefit from credit enhancement that represents 15.01%, of the note balances. The A21 notes receive credit enhancement equal to about 4.80% of the notes, they said.
SEMT 2026-1 will repay investors sequentially, and Asset Securitization Report's deal database says coupons include 5% on the A1 notes, rated AAA from Fitch and KBRA and 5.08% on the A22 notes, also rated AAA. Other coupons include 4% on the A3 notes and 4.083% on the A24 notes.
On average, the loans have a balance of $1.2 million, with weighted average (WA) coupons of 6.28%, KBRA said. Borrowers had a median income of $577,978, with liquid reserves of $749,604 on a non-zero weighted average (WA) basis.
From KBRA, ratings include AAA on the A9 through A27 tranches; AA- on the B1 notes; A- on the B2 notes; BBB- on the B3 notes; BB on the B4 notes and B- on the B5 notes.
Fitch assigns ratings of AAA on the A9 through A27 tranches; AA on the B1 notes; A on the B2 notes; BBB on the B3 notes; BB on the B4 notes and B on the B5 tranche.
