VMC Asset Pooler is preparing to sponsor another round of residential mortgage-backed securities (RMBS), selling $533.3 million in notes to investors through the Verus Securitization Trust, 2024-5.
Non-prime loans will compose the pool of 1,001 residential mortgage assets, according to Kroll Bond Rating Agency. Among the characteristics that make them non-prime is a moderate combined original loan-to-value (LTV) ratios and non-traditional income documentation. The trust will repay investors through a structure where the senior notes will be repaid on a pro-rata basis, while the subordinate notes will be repaid sequentially hybrid structure, according to the rating agency.
Various lenders originated the loans, but only one accounts for more than 10% of the asset pool, which Hometown Equity Mortgage (13%), according to KBRA. Borrowers in the pool have a non-zero weighted average (WA) original credit score of 741 and show moderate equity in each mortgaged property, with a WA LTV of 67.9%. About a third of the underlying assets, 33.6%, are categorized as non-qualified mortgages. Also, 3.3% of the pool are closed-end loans with second lien priority underwritten with various documentation methods.
The loans, almost all of which are first lien (96.7%) have an average balance of $532,796. Aside from the assets' non-traditional income documentation, a slight majority of the borrowers in the pool, 52.7%, are self-employed. Overall, the borrowers have a non-zero WA annual income of $1.2 million, with $308,495 in liquid reserves, also on a non-zero WA basis.
Documentation and underwriting for the pool was done through debt service coverage ratios (30.6%), bank statements (24.4%) and P&L and CPA letters, according to KBRA. In terms of geographic diversification, California accounts for 48.7% of the pool, while among metro areas Los Angeles accounts for 26.4% of the pool, KBRA said.
The deal has a long list of initial purchasers, including Barclays Capital, ATLAS SP Securities,
KBRA assigns ratings of AAA to the A1 notes; AA+ to the A2 notes; A+ to the A3 notes; BBB+ to the M1; BBB- to the B1; and B+ to the B2 notes.
