Prime, jumbo mortgages will secure $562.7 million in mortgage-backed securities (MBS) from the Sequoia Mortgage Trust, series 2025-1.
The transaction, slated to close on January 17, will sell notes through a series of exchangeable class A and B notes that will repay investors through a senior-subordinate, shifting interest structure, Kroll Bond Rating Agency said. Every certificate class will accrue its interest on its outstanding balance or notional balance, KBRA said.
The senior certificates get credit protection from a specified lockout period, when the subordinate classes will receive no unscheduled principal payments from the collateral mortgages, KBRA said. Scheduled principal will be distributed on a pro-rata basis after the lockout period ends. But even then, principal will only be distributed to the subordinate classes if delinquency losses do not exceed certain thresholds, KBRA said.
Tranches A9, A12 and A18 benefit from credit enhancement levels equaling 15% of the pool balance, KBRA said. The B1, B2 and B3 tranches benefit from 3.8%, 2.3% and 1.3%, respectively; and classes B4 and B5 have 0.75% and 0.45% in credit enhancement, respectively.
KBRA assigns AAA ratings to the A notes; AA to the B1 tranche; A- to the B2 tranche; BBB to the B3 tranche; BB to the B4 class and B+ to the B5 notes. The notes are slated for a final maturity date in February 2055.
Collateral consists of 477 fully amortizing mortgages, a majority of which are being used for purchases of single-family homes. Just 16.8% of the mortgages are refinancings, while cash-out transactions represent just 8.0% of the pool's outstanding balance at the cutoff date, KBRA said.
The mortgages have an average balance of $1.1 million, KBRA said. The rating agency says the collateral pool is composed of fully amortizing, fixed-rate qualified mortgages with 20- or 30-year maturities. They have a weighted average (WA) original FICO score of 778.
As for borrowers, only 14.8% are self-employed, KBRA said. On a WA basis they have a debt-to-income ratio of 35.8%, and they have a weighted average (WA) annual income of $591,445, with liquid reserves of $616,381.
