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KBRA Assigns Preliminary Ratings To Non-Prime RMBS Offering

David Krechevsky
Jan 18, 2022
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The underlying collateral, comprising 817 residential mortgages, is characterized by a notable concentration of alternative income documentation; 64.2 % of the loans were categorized as non-QM.

KBRA has assigned preliminary ratings to six classes of mortgage-backed notes from Ellington Financial Mortgage Trust 2022-1 (EFMT 2022-1), a $417.2 million non-prime RMBS transaction.

The underlying collateral, comprising 817 residential mortgages, is characterized by a notable concentration of alternative income documentation, with 69% of the loans underwritten using bank statements, asset depletion, and DSCR documentation types.

Approximately 64.2 % 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).

EFMT 2022-1 is not backed by any loans in forbearance as of the cut-off date, however, 0.2% the pool contains loans that were subject to forbearance plans but exited them and have been performing for a number of months.

KBRA assigned the preliminary rates as follows:

  • A-1: AAA
  • A-2: AA+
  • A-3: A+
  • M-1: BBB+
  • B-1: BBB-
  • B-2: BB
  • B-3, A-IO-S, X, R: Not rated

Unlike many recent non-prime securitizations that allow for pro-rata principal distributions to the Class A Notes (subject to performance triggers) prior to sequential allocations to the remainder of the capital structure, the EFMT 2022-1 payment waterfall provides for sequential principal distribution to all Notes at all times, starting with Class A-1.

Furthermore, the principal remittance amount will be used to first pay any interest shortfalls for Classes A1 and A-2 Certificates, sequentially, prior to paying principal to Classes A-1 and A-2, sequentially, until fully repaid. Thereafter, principal will be distributed sequentially to the Class A-3, Class M-1 and Class B Certificates, in each case paying interest due before reducing the class principal balance of such class.

More information is available at www.kbra.com (registration required).

Published
Jan 18, 2022
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