FirstKey Mortgage returns with its first residential mortgage-backed securities (RMBS) deal of 2023, a $279.1 million transaction that features a far larger pool of loans than some recent deals, and slightly weaker credit characteristics.
J.P. Morgan Securities is the lead underwriter on the deal, which will issue notes off of a pool of newly originated, primarily second-lien loans, according to the Asset Securitization Report's deal database.
Some 46.6% of the pool was originated through agency underwriting, while another 53.4% was through the traditional full-doc route, said KBRA. It appears that Rocket Mortgage and SpringEQ originated the loans along agency and traditional full-doc lines, respectively, considering that the two mortgage companies also accounted for the same percentage breakdown of loans in the pool, according to data from Fitch Ratings.
Fitch also noted that some 69.1% of the underlying mortgages are closed-end second (CES), fixed-rate residential mortgage loans, while 30.9% are HELOC, adjustable-rate loans. The rating agency noted that those percentages are based on the current home equity line of credit usage rate.
The pool of 3,394 loans had a closing balance of $284.3 million, according to KBRA. On a weighted average basis the loans have an original FICO score of 728, a little lower than the 764 and 772 seen in the pre-pandemic transactions of Towd Point HE Trust 2019-HE1 and Towd Point HE Trust 2021-HE1 (second liens), respectively.
Virtually all of the loans in the pool, 95.6%, are single family or planned unit development properties and are the borrowers' primary residences, Fitch said. Geographically the pool appears to be fairly diversified. The state of California accounts for 23.8%, and in terms of metro areas, Los Angeles accounts for the largest, with 6.9%.
Notes will be issued through six tranches, Fitch said. Credit enhancement to classes A1 and A2 comes from the subordinate status of the class M and class B notes, the rating agency said.
Fitch expects to assign ratings of 'AAA' on the A1 notes through 'B-' on the B2 notes, while KBRA assigns ratings of 'AAA' on the A1 notes through 'B-' on the B3 notes.
All of the notes have a final maturity of February 2063.
