Fitch Ratings recently announced it has assigned ratings to OBX 2022-NQM5 Trust notes. The notes are supported by 747 loans with a total unpaid principal balance of approximately $390.8 million as of the cutoff date.
The pool consists of fixed-rate mortgages and adjustable-rate mortgages (ARMs) acquired by Annaly Capital Management Inc. from various originators and aggregators.
Fitch assigned rates as follows:
- A-1: AAAsf
- A-2: AAsf
- A-3: Asf
- M-1: BBBsf
- B-1: BBsf
- B-2: Bsf
- B-3, AIOS, XS, R: Not rated.
The collateral consists of 15-, 30-, and 40-year fixed-rate and adjustable-rate loans. ARMs constitute 7.6% of the pool; 22.3% are IO loans and the remaining 77.7% are fully amortizing loans. The pool is seasoned approximately six months in aggregate. Borrowers in this pool have a moderate credit profile with a Fitch-calculated weighted average (WA) FICO score of 742, debt-to-income ratio (DTI) of 47.3%, and moderate leverage of 77% sustainable loan-to-value ratio (sLTV). Pool characteristics resemble recent non-prime collateral, Fitch said.
The pool contains a meaningful amount of investor properties (47%) and Non-QM loans (50%). Fitch's loss expectations reflect the higher default risk associated with these attributes, as well as loss severity (LS) adjustments for potential ability to repay (ATR) challenges. Higher LS assumptions are assumed for the investor property product to reflect potential risk of a distressed sale or disrepair.
For approximately 87% of the pool, alternative documentation was used to underwrite the loans. Of this, 33.1% 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, 40.9% are a debt service coverage ratio (DSCR) product, 4.5% are a WVOE product, 5.2% are P&L loans and 0.4% comprise an asset depletion product.
The full report is available at www.fitchratings.com.
