The CSMC 2022-NQM3 Trust is preparing to issue $561.9 million in residential mortgage-backed securities (MBS), secured by a pool of home loans with low-to-moderate original loan-to-value (LTV) ratios and non-traditional income documentation.

The collateral pool contained a significantly higher percentage of adjustable-rate (23.0%) and interest only (13.2%) mortgages than the previous transaction, the CSMC 2022-NQM2, where ARM and IO mortgages represented just 11.5% and 4.1% of the pool, respectively. Yet those ratios were certainly not the highest the series has seen, according to an assessment from Kroll Bond Rating Agency.

Credit Suisse Securities leads a group of initial purchasers, which includes CastleOak, Drexel Hamilton, HSBC Securities and Seelaus & Company.

Almost the entire deal will issue notes through a senior-subordinate capital structure that will repay principal on the notes sequentially, rather than on a modified sequential basis, which is common to most non-QM transactions that allow for pro rata payments subject to performance triggers.

Credit enhancement includes excess spread.

KBRA expects to assign ratings ranging from ‘AAA’ on the A-1A, A-1B and A-1 and ‘BB-’ on the B-1 notes.

KBRA noted a number of credit concerns in CSMC 2022-NQM3, aside from the concentration of ARM and I/Os. The rating agency also noted some high geographical concentration from California. In terms of top 10 states as a percentage of pool balance, California represents 57.6% of the pool.

Also, the top three core-based statistical areas (CBSAs)—Los Angeles, Riverside, Calif., and New York City—account for 48.3% of the pool.

All of the deal’s 1,137 loans are first-liens, and they have an average balance of $494,269. Most of the deal, 97.6%, was underwritten on alternative documentation.

Various lenders originated the loans in the pool, with AmWest Funding Corp., accounting for the largest, at 37.8%. None of the other originators account for more than 20% of originations in the rest of the pool, according to KBRA. On a weighted average (WA) basis, the loans have an original credit score of 747, a term of 361 loans, and a WA coupon of 4.42%.        

The deal is slated to close on April 29.

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