Non-prime investor residential mortgages will secure a $500 billion, residential mortgage-backed securities deal, coming through the Verus Securitization Trust in about another week.
A group of banks including J.P. Morgan Securities, Barclays Capital, Morgan Stanley and Natixis, are initial note on the deal from sponsor VMC Asset Pooler, according to a pre-sale report from Kroll Bond Rating Agency.
The A-1 notes will contain the bulk of the initial tranche balance, KBRA said. All of the notes will be benchmarked to the I-Curve, but coupons will be a mix of fixed coupons on the A-1 through A-3 notes, and net weighted average coupon (WAC) on the M-1 through B-3 notes, according to both KBRA and S&P Global Ratings.
Verus Securitization Trust 2023-INV1 consists entirely of first-lien mortgages, largely on single-family houses and planned-unit developments (66.8%), extended to prime borrowers, according to KBRA. On a weighted average (WA) basis, the borrowers have an original credit score of 734, an original loan-to-value ratio of 68.9%. The average loan balance is $401,896, according to KBRA.
Verus Securitization Trust 2023-INV1 will issue the notes through a pro-rata/sequential hybrid structure, while the structure itself provides some credit enhancement based on performance triggers, specifically cumulative loss and delinquency trigger events, according to KBRA. If the pool performance meets both performance triggers, the trust will allocate principal to the class A notes, first as unpaid interest and then as principal. Should either performance trigger not be satisfied, however, the trust will allocate principal sequentially, first as unpaid interest to the class A-1 and A-2 notes, then as principal to those notes. After than unpaid interest and principal will be allocated to the class-A notes, in that order.
Otherwise, excess spread provides credit enhancement on the notes, of around 1.33%. Other forms of credit enhancement include
Coupons on the fixed notes are expected to range from 5.64% to 6.90%, according to the rating agencies and Finsight.
KBRA says it intends to assign ratings of 'AAA' through 'A' on classes A-1 through A-3. The mezzanine M-1 notes should get a 'BBB' rating; and the B-1 and B-2 notes should receive 'BB-' and 'B-' ratings.
As for S&P, the rating agency intends to assign 'AAA' through 'A' on classes A-1 through A-3. The rating agency expects to assign 'BBB-' ratings to the mezzanine M-1 notes; and 'BB-' and 'B-' on the B-1 and B-2 notes.
