RMBS

SVB, First Republic and PacWest play a variety of roles in several RMBS, but structural protections are walling off the deals from current tremors in the banking sector.

The underlying loans are subject to certain ATR rules per the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Shellpoint Mortgage Servicing, will fund advances of delinquent principal and interest until loans become 90 days.

Unlike many non-prime RMBS transactions, 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 entire pool adheres to full documentation origination and they qualify as safe-harbor qualified mortgage, with FICO scores of 764.

SEMT 2023-2 shifted some of its underwriting from traditional full documentation to agency underwriting, with the latter accounting for 14.1% of the pool balance.

Some 69.1% of the underlying mortgages are closed-end second (CES), fixed-rate residential mortgage loans, while 30.9% are HELOC, adjustable-rate loans.

The notes will be issued from a multi-tier debt service coverage ratio (DSCR) and a payment-in-kind (PIK) feature for class E-1, class E-2 and class F notes.

The pro-rata/sequential hybrid structure provides some credit enhancement along with cumulative loss and delinquency trigger events and excess spread.

Most of the loans, 97.2%, were underwritten to less than full documentation, while 30.1% of the loans verified income on 12- or 24-month bank statements.

Most California households and businesses lack adequate flood insurance protections, raising concerns about eventual risks to RMBS and CMBS transactions.