COLT mortgage trust aims to raise $410 million in MBS – Asset Securitization Report

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COLT 2022-2 Mortgage Loan Trust is preparing to issue $410 in residential mortgage-backed securities deal, a transaction that will be heavily collateralized by California properties financed through non-QM loans underwritten to less than full documentation.
The deal is larger than the previous four COLT transactions, and not just in terms of its current pool balance. Its average model property value and average loan balance, amount to $1 million and $696,536, respectively, according to a presale report from Fitch Ratings.
Goldman Sachs is lead underwriter on the transaction, which will issue the notes form a senior-subordinate structure of about 10 classes of notes. Select Portfolio Servicing will act as servicer and Nationstar Mortgage will be master servicer of the notes.
Fitch expects to assign ratings ranging from ‘AAA’ on the $295 million class A-1 notes to ‘A’ on the $10 million class B-2 notes, according to Fitch.
The rating agency did note that it considers several aspects of the deal as ratings negatives, including the non-qualified mortgage quality of the home loans and the method of loan documentation. The trust sourced the loans from a group of servicers, including Oaktree Funding Corp., 5th Street Capital, and Sprout Mortgage. The collateral consists of 590 loans, which have been seasoned for about five months in aggregate. Borrowers maintain a primary residence on 55.7% of the collateral, while 44.3% comprise an investor property or second home. Also. About 60.9% of the loans are considered non-qualified, Fitch said. As for documentation, about 89.4% of the loans in the pool were underwritten to less than full documentation. Fifty-two percent were underwritten to a 12- to 24-month bank statement program to verify income.
Fitch noted a key distinction between this pool and legacy alt-A loans is that the COLT 2022-2 loans adhere to underwriting and documentation standards under the Ability to Repay (ATR) Rule with the Consumer Financial Protections Bureau.
The rating agency is also concerned about the collateral pool’s geographic concentration. About 58.1% of the loans in the collateral pool are concentrated in California. Indeed, two California cities make up the pool’s largest MSA concentrations, Los Angeles (34.1%) and San Diego (7.2%).
Revenue from operations and benefits from a perfected security interest in the securitized assets comprise the collateral assets.
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Aspects of the deal generally align with recent ones, including—on a weighted average (WA) basis—an original maturity of 64.3 months and seasoning of 9.7 months.
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