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Fitch Assigns Expected Ratings To Non-QM Offering Verus 2022-8

David Krechevsky
Oct 06, 2022
Fitch Ratings

The residential mortgage-backed notes are supported by 748 loans with a balance of $471.3 million..

Fitch Ratings said Wednesday it has assigned expected ratings to the residential mortgage-backed notes issued by Verus Securitization Trust 2022-8 (Verus 2022-8).

The notes are supported by 748 loans with a balance of $471.3 million as of Sept. 1, the cutoff date.

The notes are secured by mortgage loans originated by various originators, with each originating less than 10% of the loans. Primary servicing functions will be performed by Shellpoint (96.1%) and Fay (3.9%).

Of the loans in the pool, 59.3% are designated as non-qualified mortgages (Non-QM); the remaining 40.6% are investment properties not subject to the Ability-to-Repay (ATR) Rule.

The collateral consists of 5-, 7-, and 10-year hybrid adjustable-rate loans and 15-, 30- and 40-year fixed-rate loans. Adjustable-rate loans comprise 10.2% of the pool. Of the loans, 29.7% are interest-only (IO) loans and the remaining 70.3% are fully amortizing loans. 

The pool is seasoned approximately five months in aggregate, as calculated by Fitch. The borrowers in this pool have a strong credit profile, with a 735 weighted average model FICO, 42.6% model debt-to-income ratio (DTI), and relatively moderate leverage of 78.3% sustainable loan to value ratio (sLTV).

Approximately 92.2% of the loans were underwritten by alternative documentation. Of these loans, 39.3% were underwritten to a bank statement program to verify income, which is not consistent with Appendix Q standards or Fitch's view of a full documentation program. To reflect the additional risk, Fitch increases the probability of default (PD) by 1.5x on the bank statement loans. Besides loans underwritten to a bank statement program, 28.4% are a DSCR product, 4.7% are a written verification of employment (WVOE) product, 14.7% are P&L loans, and 2% comprise an asset depletion product.

Fitch assigned its expected ratings as follows:

  • A-1: AAA (sf)
  • A-2: AA+ (sf)
  • A-3: A+ (sf)
  • M-1: BBB- (sf)
  • B-1, B-2, B-3, A-IO-S: Not rated

You can read the full report at www.fitchratings.com.

Published
Oct 06, 2022
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