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Wells sponsoring third post-crisis prime jumbo MBS totaling $554M

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Wells Fargo’s prime jumbo mortgage trust platform is downsizing its latest deal compared to its first transaction of the year. But the $553.6 million transaction still represents one of the biggest offerings of large-balance home loans among other prime jumbo MBS offerings in the past year.

Wells Fargo Mortgage Backed Securities 2019-2 is a pool of 836 first-lien, fixed-rate loans with an average loan size of $662,193 to borrowers with a weighted-average FICO of 780, according to Moody’s Investors Service (Fitch Ratings reported a WA FICO of 772, still indicative of “very high credit-quality borrowers,” the agency’s presale report stated).

That pales in comparison to WFMPS 2019-1 (1,017 loans, with a total balance of $711.6 million or $699,766 per account), but is larger than other 2019 issuers including JPMorgan, Goldman Sachs, Redwood Trust and Starwood Capital Group.

(Goldman’s deal in March was among the smallest, and unlike Wells’ all-jumbo collateral includes a portion of loans eligible to be purchased, securitized or guaranteed by Freddie Mac or Fannie Mae.)

JPMorgan has the highest total deal volume at $1.9 billion this year, but that is across four transactions.

U.S. prime jumbo securitization volume for the year stands at approximately $4.2 billion.

Wells is issuing only its third post-crisis prime jumbo securitization since jumpstarting the platform last year, according to Moody’s Investors Service. The Wells transaction includes 20 classes of triple-A rated notes as rated by Moody’s; Fitch Ratings also issued AAA ratings for the various Class A tranches, and also rated the five small Class B subordinate tranches with ratings ranging from AA to BB.

All of the loans, which have a WA loan-to-value ratio of 73.3%, were originated by Wells Fargo Home Lending (one of the largest mortgage originators in the country), with 77% through its retail channels. All are covered under the safe harbor provision of the Dodd-Frank Act’s qualified mortgage rule, and have an average seasoning of four months. About 63.7% are concentrated in five states: California, New York, Washington, New Jersey and Virginia.

While most of the loans (91.2% of the pool) are designated as owner-occupied, 7.24% of the pool are second homes. Borrowers with two or more properties represent 31.7% of the pool by balance, and those with two-to-three are 30.2%. Multiple mortgaged properties makes borrowers more likely to default, according to Moody’s, “but high income borrowers with stable employment may support debt payments on vacation properties.”

According to Moody’s, 15.4% of the loan balances were refinancings.

Moody’s has expected base-case net losses of 0.25% for the pool. Fitch has a base case given-loss scenario of 0.1%.

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RMBS prime jumbo Qualified Mortgages Wells Fargo