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
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%.
