Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to seven classes of mortgage pass-through certificates from GCAT 2021-NQM4 Trust (GCAT 2021-NQM4), a $267.9 million, non-prime residential mortgage-backed security (RMBS) transaction.
The underlying collateral, comprising 463 residential mortgages, is characterized by a notable concentration of alternative income documentation, with 79.6% of the loans underwritten to less-than 12-month, 12-month or 24-month bank statements (49.2%); DSCR Investor (14.1%); Investor No Ratio (0.1%); CPA letters with P&L statements (9.6%); Asset Utilization (5.7%), and Written Verification of Employment (WVOE) (4.2%).
KBRA assigned the preliminary ratings as follows:
- A-1, A-1X: AAA
- A-2: AA+
- A-3: A+
- M-1: BBB+
- B-1: BB+
- B-2: B+
- B-3, A-IO-S, X, R: Not rated.
Approximately 63.8% of the loans were categorized as non-qualified mortgages (non-QM). The remaining loans were categorized as exempt from the ATR/QM rule having been originated for a business purpose (i.e., investment properties) or through a CDFI.
The loans were originated by Acra Lending and Arc Home LLC. The loan aggregator was Blue River Mortgage III LLC. The Master Service is Nationstar Mortgage LLC.
The GCAT 2021-NQM4 transaction is notable as it is the first KBRA-rated RMBS transaction to include a portion of the loan portfolio (14.2%) for which the third-party due diligence review will not be completed until up to 89 days after closing.
KBRA’s rating approach incorporated loan-level analysis of the mortgage pool through its RMBS Credit Model, an examination of the results from third-party loan file due diligence performed at the time of origination of the loans, 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. This analysis is further described in our U.S. RMBS Rating Methodology.
The full report is available here (registration required).
