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KBRA Assigns Preliminary Ratings To Non-QM Offering VERUS 2022-7

David Krechevsky
Jul 26, 2022
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Approximately 60% of the loans pooled in the $489.8 million non-prime RMBS transaction are categorized as Non-QM.

KBRA said Tuesday it has assigned preliminary ratings to four classes of mortgage pass-through notes from Verus Securitization Trust 2022-7 (VERUS 2022-7), a $489.8 million non-prime residential mortgage-backed securities (RMBS) transaction. 

The underlying collateral, comprising 791 residential mortgages, is characterized by a significant concentration of loans underwritten using alternative income documentation. Borrowers in the subject pool possess a non-zero weighted- average (WA) original credit score of 736 and exhibit moderate equity in each mortgaged property, with a combined loan-to-value (CLTV) ratio of 71.5%.

Approximately 60% of the loans were categorized as non-qualified mortgages (Non-QM) under the Ability-to-Repay/Qualified Mortgage (ATR/QM) rule. The remaining loans were exempt from the ATR/QM rule due to being originated for business purposes (40%).

The mortgage loans were seasoned approximately 3.5 months, and include both fixed-rate mortgages (86.5%) and adjustable-rate mortgages (13.5%). Additionally, approximately 28.6% of the pool has an initial interest-only period. 

KBRA assigned the preliminary ratings as follows:

  • A-1: AAA (sf)
  • A-2: AA+ (sf)
  • A-3: A (sf)
  • M-1: BBB (sf)
  • B-1, B-2, B-3, A-IO-S, SX, DA, R: Not rated.

KBRA’s rating approach incorporated loan-level analysis of the mortgage pool through its KBRA RMBS Credit 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 collateral consists of mortgages originated by various lenders, only one of which comprises more than 10% of the pool — Castle Mortgage Corp., with 13%. All loans in the transaction will be serviced by New Rez LLC d/b/a Shellpoint Mortgage Servicing (90.5%) and Fay Servicing LLC (9.5%).

Read the full report at www.kbra.com (registration required).

Published
Jul 26, 2022
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