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KBRA Assigns Preliminary Ratings To Non-Prime RMBS Offering

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 (registration required).

About the author
David Krechevsky was an editor at NMP.
Jan 18, 2022
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