Verus Securitization Trust is preparing to issue $593.5 million backed by a range of mortgages, and with significant amounts of home equity among the borrowers.
Verus' series 2024-8 is made up of 10 tranches, where the three class A tranches will repay investors on a senior-pro rata basis; and a mezzanine tranche and three class B tranches will repay investors sequentially, according to S&P Global Ratings. The notes have a final payment date of Oct. 25, 2069.
Barclays Capital is lead underwriter on the deal, while Shellpoint Mortgage Servicing, Lima One Capital and Nationstar Mortgage will service the notes, S&P said.
The notes are supported by a pool of 1,229 mortgages, which are mainly newly originated, fixed- and adjustable-rate on first and second liens, the rating agency said. Also, some of the mortgages have an interest-only period.
The pool does have several key strengths, S&P said. Underlying borrowers have accumulated significant amount of home equity in their homes, to a weighted average (WA) original cumulative loan-to-value (CLTV) ratio of 69.5%. Among the deal's strengths is the entire pool received a third-party due diligence from a series of providers that are on S&P's list of reviewed providers.
Another strength in the deal structure is the credit support on classes A1, A2 and A3, which require principal to be repaid to the senior notes in full and for them to be retired, before the subordinate classes receive principal.
Other characteristics present some weaknesses to the pool, however, including a significant number of business-purpose investors loans. Also there is a significant number of loans with alternative income documentation, which represents about 48.2% of the pool balance. Self-employed borrowers accounted for 51.5% of the pool, S&P said.
Five hundred, nineteen loans in the pool are property-focused investor loans underwritten to borrowers in business, and did not consider their income or employment. They represent 32.04% of the pool balance. The pool had a 1.09x WA, non-zero debt service coverage ratio (DSCR).
The rating agency assigns AAA, AA and A to the A1, A2 and A3 notes; BBB- to the M1 notes; and BB and B to the B1 and B2 notes.
