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KBRA has assigned preliminary ratings to six classes of mortgage pass-through notes from OBX 2022-NQM6 Trust (OBX 2022-NQM6), a $387.9 million non-prime residential mortgage-backed securities transaction.
The underlying collateral, comprising 623 residential mortgages, is characterized by a notable concentration of alternative income documentation (87.7%). Based on the Ability-to-Repay/Qualified Mortgage (ATR/QM) rule, approximately 60.1% of the loans were categorized as non-qualified mortgages (Non-QM). The remaining loans (39.9%) were exempt from the ATR/QM rule due to being originated by a Community Development Financial Institution (CDFI) or for business purposes (i.e., investment properties).
KBRA said the transaction contains loans it generally considers to be non-prime due to certain loan or borrower characteristics, which include borrowers with blemished credit histories and the use of bank statements and other forms of alternative documentation for verifying income.
The loans in the OBX 2022-NQM6 collateral pool were originated by relatively small, unrated entities and underwritten to non-traditional income documentation, KBRA said. All lenders contributed less than 15% of the mortgage loans, with the largest originator being Amwest Funding Corp. (13.6%).
KBRA said it assigned 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, XS, R: Not rated.
KBRA said its rating approach incorporated loan-level analysis of the mortgage pool through its U.S. RMBS Mortgage Default and Loss 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 full report is available at www.kbra.com (registration required).