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Lending

Credit Suisse subsidiary issues latest RMBS deal

Majority of classes pre-rated triple-A

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Credit Suisse (CS) is bringing another residential mortgage-backed securities deal to market, prompting two ratings giants to pre-rate the issuance on Thursday.

Provisional ratings from the 'CSMC Trust-Series 2013-IVR5' deal show DBRS giving a majority of the pre-rated classes its highest ‘AAA’ credit quality due to a 7.55% credit enhancement.

The collateral backing the certificates includes 398 prime residential home loans acquired by Credit Suisse subsidiary, DLJ Mortgage Capital, with a principal balance of $301.9 million. 

The representation and warranties tied to the transaction also are considered of stronger quality when compared to the two previous Credit Suisse prime jumbo deals – CSMC 2012-CIM3 and CSMC 2013-THI.

"However, the relatively weak financial strength of certain originators coupled with the sunset provisions on the backstop by DLJ still demand additional penalties and credit enhancement protections," DBRS noted.  

Mortgage originators tied to the deal include Guaranteed Rate, BofJ Federal Bank, Sierra Pacific Mortgage, RPM Mortgage, Cole Taylor Bank, Skyline Financial Corp. and several other major originators.

Select Portfolio Servicing will service most of the loans, with PHH Mortgage Corp. and First Republic Bank handling a minority of the servicing.

Standard & Poor’s also rated the deal, assigning AAA ratings for most of the classes. Compared to the typical prime pools rated by S&P, the CSMC 2013-IVR5 deal features “substantially higher credit scores” and borrowers with more home equity, lower debt-to-income ratios and a 6.25% resulting raw loss coverage requirement at the AAA rating level, S&P said. 

Forty-percent of the loans are purchase mortgages and 99.2% are full-doc mortgages complete with key IRS forms. None of the loans are 30 days delinquent.
S&P said the pools strengths include “very high average FICO scores and a high level of liquid cash reserves to mortgage payments.

All of the loans in the pool went through a third-party due diligence provider, which focused on regulatory compliance, underwriting, property valuations and borrower pay history.

"The senior classes benefit from a credit support floor, whereby the principal allocation to the subordinate classes falls to zero on any distribution date where the subordinate certificates' aggregate balance is less than 1.45% of the original collateral balance," S&P said.  

S&P sees the geographic concentration of the deal’s jumbo loans – with many of them located in Southern California – as its greatest impediment.  A significant portion of the loans' originators come out of Los Angeles, San San Diego, and Oakland, Calif.

S&P warned many of the smaller originators in the deal are unable to buy back the loans should that situation occur. Under such a scenario, DLJ would have to repurchase the mortgages.

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