Fitch Ratings has assigned ratings to residential mortgage-backed notes issued by OBX 2022-NQM7 Trust (OBX 2022-NQM7).
The notes are supported by 681 loans with a total unpaid principal balance of approximately $358.9 million as of the cut-off 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- and 40-year, fixed-rate and adjustable-rate loans. ARMs constitute 6.9% of the pool, 16.8% are IO loans, and the remaining 83.2% are fully amortizing loans. The pool is seasoned approximately seven months in aggregate, as calculated by Fitch.
Of the loans, approximately 57.5% are designated as non-qualified mortgages (Non-QM), while 37% are investment properties not subject to the Ability-to-Repay (ATR) Rule.
Fitch assigned ratings as follows:
- A-1: AAA(sf)
- A-2: AA(sf)
- A-3: A(sf)
- M-1: BBB(sf)
- B-1: BB(sf)
- B-2: B(sf)
- B-3, A-IO-S, X-S: Not rated.
Borrowers in this pool have a moderate credit profile with a Fitch-calculated weighted average (WA) FICO score of 741, debt-to-income ratio (DTI) of 43.4%, and moderate leverage of 77.3% sustainable loan-to-value ratio (sLTV). Pool characteristics resemble recent non-prime collateral, Fitch said.
Fitch viewed approximately 83.5% of the pool as less-than-full documentation, and alternative documentation was used to underwrite the loans. Of this, 48.1% 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 by 1.6x on the bank statement loans, it said.
Besides loans underwritten to a bank statement program, 24.1% are a debt service coverage ratio (DSCR) product; 2.3% are a written verification of employment (WVOE) product; 4.4% are profit-and-loss (P&L) statement loans; and 3.5% constitute an asset depletion product.
You can read the full report at www.fitchratings.com.
