New York-based ratings agency KBRA has assigned preliminary ratings to six classes of mortgage pass-through notes from OBX 2022-NQM3 Trust (OBX 2022-NQM3), a $315.8 million non-prime RMBS transaction.
The underlying collateral, comprising 518 residential mortgages, is characterized by a notable concentration of alternative income documentation (86%). With respect to the Ability-to-Repay/Qualified Mortgage (ATR/QM) rule, approximately 58.5% of the loans were categorized as non-qualified mortgages (non-QM). The remaining loans (41.5%) were categorized as QM: Safe Harbor (2.4%), QM: Rebuttable Presumption (0.2%), or exempt from the ATR/QM rule (38.9%) due to being originated for business purposes (i.e., investment properties).
KBRA assigned preliminary ratings as follows:
- A-1A, A-1B, A-1: AAA
- A-2: AA+
- A-3: A-
- M-1: BBB-
- B-1, B-2, B-3, A-IO-S, XS, R: Not rated.
KBRA said the transaction contains loans which it generally considers to be non-prime due to certain loan or borrower characteristics that include borrowers with blemished credit history and the use of bank statements and other forms of alternative documentation to document income.
OBX 2022-NQM3 is sponsored by Onslow Bay Financial LLC. 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 purchases all residential whole loans through Onslow Bay. The company purchases a mix of agency-eligible, prime jumbo, and expanded/non-prime collateral.
KBRA’s 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.
Read KBRA’s full report here (registration required).
