Home collateral OBX cooks up a May MBS windfall through jumbo, non-prime deals

OBX cooks up a May MBS windfall through jumbo, non-prime deals


Onslow Bay opens May with massive issuances of residential mortgage-backed securities (RMBS) on two separate credit tracks. Its OBX 2022-J1 Trust (OBX 2022-J1) deal will fund approximately $393.3 million in prime jumbo mortgages, while OBX 2022-NQM4 will raise $457.2 million in RMBS to back a tranche not privileged on the credit spectrum.

Investors will get an early chance to access higher credit quality assets first, as the OBX 2022-J1 is expected to close on May 4. real estate loans, according to Moody’s Investors Service, which assigned preliminary ratings ranging from ‘AAA’ on the senior and super senior tranches and ‘Aa3’ and ‘A2’ on the subordinated notes. All these tickets are exchangeable. Moody’s also said it plans to assign “Baa2” to “B2” ratings on subordinated certificates.

OBX purchased the loans from Bank of America, whose affiliate, Bank of America Merrill Lynch, had served as lead manager in structuring the OBX 2021-J3 transaction, which issued approximately $433.2 million of Prime jumbo RMBS.

In addition to issuing the Notes from a senior-subordinated payment structure, the Super Senior Notes will receive an initial credit enhancement of 15.0%, and the Senior Support Bonds will receive an initial support of 5.0%. .0%. In addition, the senior structure offers a senior credit enhancement floor of 1.25%.

Among the credit strengths of the agreement is the typical profile of the borrower. On a weighted average (WA) basis, the prime borrower has a credit score of 776, and WA’s initial cumulative loan-to-value (CLTV) ratio is 65.1%. The collateral pool does not have interest-only loans.

As for the OBX 2022-NQM4 deal, Morgan Stanley & Co., Barclays Capital and BMO Capital Markets are the first purchasers of the notes, according to ratings agency Kroll Bond.

The transaction, which is expected to close on May 10, will issue notes backed by payments on 704 first mortgages. Most home loans, 67.5%, are owner-occupied, while 28.9% are investment properties, KBRA said.

By pool balance, some 41.9% of loans were underwritten on the basis of bank statements as part of the due diligence process, while approximately 21.0% were underwritten using full documentation methods and 18, 8% was subscribed with DSCR, using the expected ownership ratio. rental income to property debts and charges.

On average, the loans have an average balance of $649,553. The top five aggregate balances of the transaction account for 3.3% of the pool balance, according to the KBRA.

Like sister platform OBX’s deal, the NQM4 transaction will repay investors via a sequential structure, with an excess spread and 120-day stop advance providing credit support.

Borrowers’ credit profiles were slightly lower than those of the jumbo loan pool, with a weighted average (WA) credit score of 745 and an initial loan-to-value ratio of 70.0%. Half of the borrowers in the pool are self-employed, with a non-zero WA annual income level of $531,769 and a WA debt-to-income (DTI) ratio of 36.9%.

Mortgages issued on homes in California make up the majority of the pool balance, 52.7%, and Los Angeles represents the metro area with the highest concentration of loans in the pool, 30.1%.

Select Portfolio Servicing will provide 86.4% of the pool balance. KBRA plans to award grades ranging from “AAA” on super senior A-1A grades to “A” on senior sequential A3 grades; ‘BBB’ on the M-1 Mezzanine Notes, and ‘BB-‘ and ‘B-‘ on the B-2 Subordinate Notes.