Sequoia Mortgage Trust is preparing to issue $440.8 million in residential mortgage-backed securities (RMBS) to investors, one of the first deals to price in the new year.
Sequoia Mortgage, slated to close on January 17, was one of two RMBS transactions that priced a total of $854.5 million in transactions for the new year, giving RMBS a strong early showing in the Asset Securitization Report's securitization tally.
Morgan Stanley and Raymond James & Associates were managers on the deal, which will offer notes secured by payments on high-quality mortgage assets, according to ratings analysts from Fitch Ratings. Borrowers have a strong credit profile, with a 775 model FICO score, a 35.4% debt-to-income ratio, and what Fitch believes is moderate leverage—a 75.1% sustainable loan-to-value (LTV) ratio and a 67.5% mark-to-market combined LTV ratio. Fitch also noted that virtually the entire pool, 99.6%, are designated as qualified mortgage (QM) loans.
Some 91.8% of the collateral pool's underlying loans are funding a primary residence, while 8.2% of the mortgages fund a second home. Also, 80.3% of the loans were originated through a retail channel, according to Fitch analysts.
Sequoia's notes will be issued from a senior-subordinate, shifting-interest structure in which the subordinate classes only receive scheduled principal. They are locked out from receiving any unscheduled principal or prepayments for five years. This lockout feature helps to extend subordination in the structure to preserve the senior notes against losses later in the transaction's cycle—the notes have a final scheduled repayment date of January 2054, Fitch said.
Fitch has assigned 'AAA' to all of the class A notes; AA- to the class B-1 notes; A- to the B-2 notes; BBB- to the B-3 notes and BB to the B-4 notes.
DBRS Morningstar also assigned AAA ratings to all of the class A notes; AA- to the B-1 notes; A- to the B-2 notes; BBB- to the B-3 notes and BB to the B-4 notes, according to the ASR deal database.
Kroll Bond Rating Agency assigned AAA to the class A notes; AA+ to the B-1 notes; A to the B-2 notes; BBB to the B-3 notes and BB+ to the B-4 notes.
