Guaranteed Rate Inc. is sponsoring a securitization of first-lien, fixed-rate prime mortgages through the RATE Mortgage Trust 2021-HB1, and it is the sponsor’s first deal where conforming, high-balance mortgage loans underwritten using an automated system designated by an agency account for 100% of the collateral pool.

Guaranteed Rate has issued four prime jumbo securitizations from the current RATE J shelf. This pool consists of fully amortizing mortgages with original terms of mainly 30 years, and that have aged about one month, according to DBRS Morningstar, which expects to assign ratings to the notes.

The deal is expected to close on Dec. 10. The majority of the notes are expected to be rated ‘AAA’, with several subordinate classes likely to be rated ‘AA’ through ‘B’.

Bank of America Securities, Citigroup Global Markets, Goldman Sachs & Co. and Morgan Stanley & Co. are initial purchasers of the notes. The deal’s capital structure uses a senior-subordinate, shifting-interest cash flow structure enhanced from a pre-crisis structure, said DBRS.

Guaranteed Rate has the option to repurchase any mortgage loan that becomes delinquent by 90 to 120 days under the Mortgage Bankers Association method. The pricing will be equal to par plus interest and unreimbursed servicing advance amounts, as long as the purchases come under 10% of the initial principal balance as of Nov. 1, the collateral pool’s cutoff date.

DBRS notes that the borrowers on the underlying loans have high credit quality. Original CLTV ratios, in a weighted average basis, are 67.2%, the loans’ debt-to-income ratio, on a WA basis, is 35%, and the WA FICO score is 763. Just 3.8% of the 549 loans in the collateral pool are piggyback seconds, DBRS said.

The average loan balance is $697,414, with a WA coupon of 2.9%.

RATE Mortgage, 2021-HB1 uses a representations and warranty framework with some notable weaknesses, according to DBRS. For one, Guaranteed Rate will make the R&W, but is not a rated R&W provider. Also, the transaction includes certain sunset mechanisms that allow for certain R&W provisions to expire within three to six years after the closing date.

Also, the servicing administrator is expected to advance scheduled principal and interest on delinquent mortgages until those loans become 120 days delinquent, or they are deemed unrecoverable. DBRS says this will likely result in lower loss severities, because the advances will not have to be reimbursed from the trust when the mortgages are liquidated. Instead, certificate holders could experience periodic interest shortfalls.

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