KBRA has assigned preliminary ratings to seven classes of mortgage pass-through notes from CSMC 2022-NQM3 Trust (CSMC 2022-NQM3), a $561.9 million non-prime residential mortgage-backed securities transaction.
The underlying collateral, comprising 1,137 residential mortgages, is characterized by a significant concentration of loans underwritten using alternative income documentation. Borrowers in the subject pool possess a non-zero weighted average (WA) original credit score of 747 and exhibit substantial equity in each mortgaged property, with WA loan-to-value (LTV) and combined LTV (CLTV) ratios of 70.5% and 70.5%, respectively.
The collateral consists of mortgages originated by various lenders, the largest of which is AmWest Funding Corp. (AmWest; 37.8%). None of the remaining originators account for more than 20% of the pool. All loans in the transaction will be serviced by AmWest (37.8%), Select Portfolio Servicing (SPS) (38.4%) or Selene Finance LP (Selene; 23.8%).
The transaction is a sequential payment structure. Borrowers in CSMC 2022-NQM3 possess a non-zero WA original credit score of 747 and exhibit notable equity in each mortgaged property, with WA LTV and combined LTV (CLTV) ratios of 70.5% each.
KBRA assigned the preliminary rates as follows:
- A-1A, A-1B, A-1: AAA
- A-2: AA
- A-3: A
- M-1: BBB
- B-1: BB-
- B-2, B-3, A-IO-S, XS, PT, R: Not rated.
KBRA’s rating approach incorporated loan-level analysis of the mortgage pool through its KBRA RMBS Credit Model, an examination of the results from third-party loan file due diligence, cash-flow modeling analysis of the transaction’s payment structure, reviews of key transaction parties, and an assessment of the transaction’s legal structure and documentation.
The loans include both fixed-rate mortgages (77%) and adjustable-rate mortgages (ARMs 23%). Additionally, approximately 13.2% of the pool has an initial interest-only period. Approximately 41.9% of the loans were categorized as non-qualified mortgages (Non-QM) under the Ability-to-Repay/Qualified Mortgage (ATR/QM) rule. The remaining loans were either classified as QM: Safe Harbor (0.1%) or exempt from the ATR/QM rule due to being originated for business purposes (58.0%).
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