A portfolio of non-agency, business-purpose, investor loans from sponsor VMC Asset Pooler will secure the $389.5 million, Verus Securitization Trust, 2022-INV1, due out by the end of August.
Verus Asset Pooler sourced the loans from a group of originators that underwrote the loans according to Verus' Property Focused Investor Loan program, according to Kroll Bond Rating Agency. The underwriting program relies on the value of the related mortgaged property and if applicable, the guarantor's credit score.
In some cases underwriters did not use any debt service coverage ratio (DSCR) numbers. KBRA also noted that the collateral can exhibit characteristics which will discourage the government-sponsored entities or traditional non-agency mortgage programs from extending credit to loans without any borrower debt-to-income based income underwriting, a borrower with too many mortgages properties or borrowers that are non-natural persons, such as LLCs, KBRA said.
Some 853 residential mortgages comprise the underlying collateral pool, and they have relatively low original loan-to-value (LTV) ratios, of about 67.7%. New Rez, also known as Shellpoint Mortgage Servicing, will service all of the loans.
Credit Suisse Securities and Barclays Capital are initial note purchasers, leading a group of other institutions that includes Deutsche Bank Securities and Morgan Stanley & Co.
Notes will repay principal to the class A notes—classes A-1, A-2 and A—on a pro rata basis and are subject to performance triggers, KBRA said. Once the class A notes are fully repaid, principal can be distributed to the mezzanine and subordinate notes. After the class A notes are repaid, principal will be allocated sequentially, beginning with the class M-1 notes.
The trust will repay interest on classes A-1 through B-2 and then sequentially. Any remaining amounts will be added to an excess cashflow account, which will serve as credit enhancement for the deal.
California is where some 37.2% of the loans in the pool balance are located, while Florida, New York, Texas and New Jersey follow, accounting for 18.0%, 10.4%, 5.1%, and 3.4% of the pool, respectively, according to KBRA. In terms of core-based statistical areas, similar to metro areas, Los Angeles leads the pool concentration, with 20.6% of the loans by pool balance.
On a weighted average (WA) basis, the collateral's loan-to-value ratio is 67.7%, an original FICO score of 740, according to the rating agency.
KBRA expects to assign ratings of 'AAA' through 'A' on the A-1 through A-3 notes, 'BBB' on the mezzanine notes, then 'BB-' on the B-1 notes and 'B-' on the B-2 notes.
