Securitization

Figg will advise financial institutions, issuers, arrangers and underwriters on asset-backed securities (ABS) deals, collateralized loan obligations among other transactions.

A reserve account starts off at 0.0%, but its funding level varies in line with three-month average excess spreads, if it falls below certain thresholds.

Unlike estimated excess spread, which increased to 13.2%, from 12.8% on the EART 2024-4 transaction, several other forms of credit enhancement levels dropped.

The bonds are tied to rights to collect mortgage payments, known as mortgage servicing rights, and it's only the second such deal that's non-recourse.

Second-lien loans make up virtually the entire pool, which carries some risk of poor recovery rates. Yet 78% of the pool is also considered safe-harbor mortgages.

Borrowers are considered prime in this pool, but Fitch Ratings notes that delinquency rates have been increasing since 2022.

Total hard credit enhancement will represent 4.5% of the note balance, and initial reserves amounting to 2.0% of the pool.

The $1 billion securitization includes a $424 million fixed rate Aaa-rated portion with a yield of 5.133% as well as a $424 million floating Aaa-rated portion priced at 110 basis points over the Secured Overnight Financing Rate.

Almost the entire pool of mortgages will fund primary residences and were underwritten using full documentation.

Portfolio managers should consider choosing CLOs and ABS over corporate credit and agency MBS over Treasuries in 2025, says asset manager Janus Henderson.