Fitch Ratings said recently it expects to rate the residential mortgage-backed notes issued by OBX 2022-NQM9 Trust.
The notes are supported by 643 loans with a total unpaid principal balance (UPB) of approximately $359.4 million as of the cutoff date. The pool consists of fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs) acquired by Annaly Capital Management Inc. from various originators and aggregators.
The collateral consists of 30-year and 40-year fixed-rate and adjustable-rate loans. ARMs constitute 7.3% of the pool as calculated by Fitch, which includes 2.9% DSCR loans with a default interest rate feature; 15.5% are interest-only (IO) loans, while the remaining 84.5% are fully amortizing loans.
The pool is seasoned approximately six months in aggregate as calculated by Fitch. Borrowers in this pool have a moderate credit profile, with a Fitch-calculated weighted average (WA) FICO score of 740, debt-to-income ratio (DTI) of 41.6%, and moderate leverage of 80.6% sustainable loan-to-value ratio (sLTV).
Of the loans, approximately 64.9% are designated as non-qualified mortgage (Non-QM), 35.1% are investment properties not subject to the Ability to Repay (ATR) Rule, and 0.1% ATR risk loan.
Fitch said its loss expectations reflect the higher default risk associated with these attributes, as well as loss severity (LS) adjustments for potential ATR challenges. Higher LS assumptions are assumed for the investor property product to reflect potential risk of a distressed sale or disrepair, it said.
Fitch said it viewed approximately 86.2% of the pool as less-than-full documentation, and alternative documentation was used to underwrite the loans. Of this, 51.5% 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, it said. To reflect the additional risk, Fitch increased the probability of default (PD) by 1.4x on the bank statement loans.
Besides loans underwritten to a bank statement program, 19.5% are a DSCR product, 3.8% are a WVOE product, 4.3% are P&L, loans and 2.7% constitute an asset depletion product.
Fitch said it expects to rate the notes as follows:
- A-1A, A-1B: AAA (sf)
- A-2: AA (sf)
- A-3: A (sf)
- M-1: BBB (sf)
- B-1: BBB (sf)
- B-2: B (sf)
- B-3, A-IO-S, XS, R: Not rated.
The transaction was scheduled to close on Dec. 8, 2022.
