KBRA has assigned preliminary ratings to six classes of mortgage pass-through notes from Imperial Fund Mortgage Trust 2022-NQM2 (IMPRL 2022-NQM2), a $408.9 million non-prime RMBS transaction.
The underlying collateral, comprising 904 residential mortgages, is characterized by a notable concentration of alternative income documentation (95.6%). Based on the Ability-to-Repay/Qualified Mortgage (ATR/QM) rule, approximately 59.3% of the loans were categorized as non-qualified mortgages (non-QM). The remainder (40.7%) were categorized as exempt from the ATR/QM rule due to being originated for business purposes (i.e., investment properties).
KBRA assigned the preliminary ratings as follows:
- A-1: 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.
This transaction contains loans which KBRA generally considers to be non-prime due to certain loan or borrower characteristics, which include borrowers with blemished credit history and the use of bank statements and other forms of alternative documentation to document income.
The originator, A&D Mortgage LLC, has been originating loans since 2012, KBRA said. Since 2016, more than 60% of A&D’s nearly $3.2 billion in origination has been in non-QM products, with the remainder being conventional loans, it said.
A&D is a Fannie Mae & Freddie Mac approved seller and servicer and has a track record as a loan seller to various private-label securities (PLS) investors, including non-QM loan aggregators and banks who aggregate jumbo loans, KBRA said. A&D’s management team members have between nine and 30 years of experience and average approximately 16 years in mortgage and banking, it said. In late 2020, the Imperial Fund, an affiliate of A&D Mortgage, began sponsoring its own transactions under the Imperial Fund Mortgage Trust shelf including the subject transaction.
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.
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