A pool of business-purpose mortgages, or loans on rental properties, will secure the $183.6 million in mortgage-backed securities (MBS) from the Visio 2023-1 Trust.
The collateral contains a wide range of collateral property types, including single-family residences, planned unit developments, condominiums and two-to four-family units, according to a pre-sale report from S&P Global Ratings.
Two institutions—Barclays Capital and ATLAS SP Securities, which is a division of Apollo Global Securities—are named as underwriters on the deal. Visio-Beach Point Mortgage Trust is sponsoring Visio 2023-1 Trust, which will issue notes through a senior-subordinate structure that will also provide credit enhancement to the notes. The deal is scheduled for a March 22 close.
Some 655 newly originated and fully amortizing residential mortgage loans are in the pool, whose characteristics highlight its business purpose. The whole pool was underwritten to debt-service coverage rations based on the expected rental income of the mortgaged property, S&P said.
While its business purpose and underwriting might not qualify the pool as prime, Visio's collateral does contain mortgage to prime borrowers as well as non-prime. Among other more stabilizing characteristics, fixed mortgages account for the vast majority of the loans, or 77.57%, while adjustable-rate loans represent another 22.43%, according to S&P.
As for property types, single-family residences account for 51.22% of the pool; two-to four-family homes another 23.98%; planned-unit developments represent 15.61% of the pool, and condominiums another 9.19%, the rating agency said.
Seasoned loans, which were called loans from prior transactions, are among the collateral, but they make up only about 1.04% of the total pool balance, S&P said. More concerning is that BSI Financial Services, the servicer, is not required to make any principal and interest (P&I) payments on any mortgage loans that it services, the rating agency says. In many non-prime RMBS transactions they are required to make those payments, S&P took this into account and applied certain liquidity stresses.
S&P estimates that the 'AAA' loss coverage requirement for the pool is set at 35.75%.
As for the ratings on the notes, S&P expects to assign ratings of 'AAA' to the most senior class of notes; 'AA' to the A-2 notes; and 'A' to the A-3 notes. The mezzanine class, M-1, is expected to be rated 'BBB'; and the B-1 and B-2 classes are expected to be rated 'BB-' and 'B-', respectively.
