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KBRA Assigns Preliminary Ratings To OBX 2022-NQM1 Trust

Director of Events
Jan 17, 2022

Kroll Bond Rating Agency assigned preliminary ratings to six classes of mortgage pass-through notes from OBX 2022-NQM1 Trust, a $556.7 million non-prime RMBS transaction.

OBX 2022-NQM1 Trust consists of 786 residential mortgages issued by Onslow Bay Financial LLC, with 73.8% characterized by notable alternative income documentation. According to KBRA, 64.4% of the loans were categorized as non-QM, with the remaining 35.6% categorized under the QM rule. 

“OBX 2022-NQM1 is sponsored by Onslow Bay Financial LLC (Onslow Bay). Onslow Bay was formed in July 2013 and operates as a wholly-owned subsidiary of Hatteras Financial Corp., which was acquired in July 2016 by Annaly Capital Management Inc. (Annaly),” according to KBRA's rating.

“Annaly purchases all residential whole loans through Onslow Bay. The company purchases a mix of agency-eligible, prime jumbo, and expanded/non-prime collateral. To date, purchase activity has been in the agency-eligible and expanded/non-prime sectors. The loans in OBX 2022-NQM1 were sourced through acquisitions and bulk transactions from several aggregators/lenders, with a diverse set of originators contributing collateral to the subject pool. Seller diversification can reduce exposure to any particular entity; however, it also typically increases exposure to originators with limited financial resources and increases the variation in underwriting standards and processes applied to the loan pool.”

KBRA believes non-prime, non-QM loans may generally result in higher incidence and success rates of ATR claims by borrowers in the event of foreclosure than for prime non-QM loans; however, KBRA also notes that positive historical loans performance over time help mitigate this risk.

The company also found a relatively weak representation and warranty framework, compared to previous OBX expanded prime deals. However, KBRA notes that it is consistent with industry standards for non-prime collateral.

“KBRA applied an increase to its loss expectations due to the uncertain regulatory environment surrounding the rule. KBRA’s adjustment is based on numerous factors, including the number of TRID-Eligible loans in the pool, the low cap on statutory damages ($4,000), and KBRA’s opinion of the low likelihood of successful affirmative claims,” according to the rating.

About the author
Director of Events
Navi Persaud is Director of Events at NMP.
Published
Jan 17, 2022
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