Sequoia Mortgage prepares $507.1 million in prime RMBS

RWT Holdings is in the market for a third time this year, selling $507.1 million in prime residential mortgage-backed securities (RMBS) to investors through the Sequoia Mortgage Trust, 2026-INV3.

BofA Securities is the lead underwriter of the deal, which offers about 12 rated tranches of notes, all of which have a final legal maturity date of May 2056 on all the notes, according to Fitch Ratings.

Among SEMT 2026-INV3's offered notes, the A-9, A12, A-18, A-21 and B-1A, tranches will offer noteholders coupons of 4.50%, according to analysts at Fitch.

The deal is slated to close on May 22, according to analysts at Kroll Bond Rating Agency, and the notes are supported by a collateral pool with a slightly higher loan count than the one securing the SEMT 2026-INV2, a slightly larger loan balance and more moderate leverage, according to KBRA.

BofA Securities is the structuring lead and joint lead bookrunner, while Stifel Nicolaus is co-manager.

Under the terms of the transaction, the servicer or the servicing administrator are required to forward advance scheduled interest and principal payments on behalf of delinquent borrowers, if the amounts can be recovered, KBRA said.

The deal will repay noteholders through a senior-subordinate and shifting interest payment priority, KBRA said.

Some 1,275 mortgages that had a total balance of $507.1 million as of the cutoff date, and they finance investor and second-occupancy loans that aggregator Redwood Residential Acquisition obtained from the originators, which included Rocket Mortgage. The latter accounted for 42.9% of the loans in the pool, followed by AmeriHome Mortgage Company (39.5%), Fairway Mortgage (9.7%) and others, which accounted for 7.9% of the pool.

The offered class A notes benefit from credit enhancement levels equaling 15.0% of the outstanding balance, according to the rating agencies. The B1A, B2A, B3, B4 and B5 notes benefit from levels of 7.35%, 5.10%, 3.10%, 1.65% and 1.00%, respectively, the rating agency said.

Despite the quality of the pool's underlying loans, the pool has a large proportion of investment properties, 76.7%. Those types of mortgages are a potential credit vulnerability because they are susceptible to higher default probabilities.

On average, the first-lien loans have a balance of $397,746, which moderate leverage of 70.9%. Borrowers have a FICO score of 768, non-zero weighted average annual income of $380,651, with $368,750 in liquid reserves.

KBRA assigns AAA to the A9 through A21 notes; AA+ to the B1 notes; A+ to the B2 notes; and BBB+, BB+ and B+ to the B3, B4 and B5 notes, respectively.

Fitch assigns AA to the A9, A12 and A18 notes; AA- to the B1 notes; A to the B2 notes; and BBB, BB and B to the B3, B4 and B5 notes, respectively.