Two Harbors Investment Corp. is preparing to bring a $434.17 million RMBS deal called Agate Bay 2013-1, according to a Fitch Ratings presale report.

The deal is structured with $400.74 million, ‘AAA’-rated class A-1 notes; $10.64 million, ‘AA’-rated, class B-1 notes; $8.47 million, ‘A’-rated, B-2 notes; $6.30 million, ‘BBB’-rated, class B-3 notes; and $3.47 million, ‘BB’-rated, class B-4 notes.  Fitch will not rate the $4.56 million, class B-5 notes.

An affiliate of Two Harbors is expected to be the initial purchaser of the subordinate notes. Merrill Lynch, Pierce, Fenner & Smith is lead underwriter on the deal.

The notes are backed by prime fixed-rate mortgages originated by various entities. Two Harbors acquired the loans on a bulk purchase basis. The top three originators of the loans that make up more that 5% of the pool are Guaranteed Rate, RPM Mortgage and Opes Advisors.

Fitch said in the presale report that these lenders have a limited performance history but the credit enhancement on the transaction was enough to mitigate originator risk. The triple-A’s are structured with 7.70% credit enhancement and the subordinate notes are structured with 3.64% credit enhancement.

In terms of  representation and warranty agreement for the new transaction, Fitch  said it is structured similarly to recent transactions the agency has rated this year. ABMT 2013-1 contains a binding arbitration agreement that serves to privide timely resolution to rep and warranty disputes. Under the agreement, all loans that become 120 days or more delinquent will be autiomatically reviewed for breaches of reps and warranties.

ABMT 2013-1 is Two Harbors first securitization using its own depositor.The REIT has been an active loan aggregator and investor in both agency and non-agency RMBS. The company announced its second quarter financial results  on August 6 that as of June 30, 2013, it had mortgage loans held-for-investment with a carrying value of $401.3 million and the company's collateralized borrowings had a carrying value of $363.0 million.

The company has $413.8 million outstanding under short-term financing arrangements to fund the prime jumbo mortgage loan collateral. The company said its intention in the future is to securitize these loans and/or exit through a whole loan sale.

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