Latest jumbo RMBS from Credit Suisse awarded AAA ratings

DBRS cites high quality borrowers as strength of deal

Credit ratings agency DBRS assigned mostly AAA ratings to a prime, jumbo residential mortgage backed securitization issued by Credit Suisse (CS).

The $371.45 million offering, called CSMC Trust 2014-WIN2, is backed by 511 loans issued to borrowers with a weighted average FICO score of 769.

The average loan balance is $726,902 and weighted average coupon is 4.304%. The weighted average original collateralized loan-to-value ratio is 73.2% and the weighted average debt-to-income ratio is 32.9%.

DBRS said that the quality of the borrowers is a strength of the deal.

“This transaction exhibits high-quality credit attributes such as low loan-to-value ratios, strong borrower credit and full documentation on substantially all loans,” DBRS said in its presale report. “In addition, the pool contains no interest-only loans and no investment properties.”

According to DBRS’ report, all of the underlying loans were current as of the cutoff date. “Except for 18 loans that had previous servicing transfer-related payment disruptions, no loan has had prior delinquencies in the past 12 months,” DBRS said.

DBRS also cites the offerings structural enhancements as a positive of the deal. “Compared with a pre-crisis shifting-interest structure, this transaction employs several structural enhancements, including a subordination floor is present to address tail risk and retain credit support,” DBRS said.

“In the event of a servicer loan modification, the reimbursement of servicing advances would be reduced only from the principal distribution amount in reverse order of priority. The advance reimbursements may not result in reductions in interest distribution payments.”

The originators for the mortgage pool are New Penn Financial (22.5%), Quicken Loans (18.8%), Fifth Third Mortgage Company (11.6%), EverBank (10.3%), Caliber Home Loans (7.9%) and various other originators, each comprising less than 5%.

The loans will be serviced by Select Portfolio Servicing (52.9%), New Penn doing business as Shellpoint Mortgage Servicing (22.5%), Fifth Third (11.6%), EverBank (10.3%), PHH Mortgage Corporation (1.5%) and Susquehanna Bank (1.3%).

DBRS said that some of the originators in the transaction “may have limited history in prime jumbo securitizations and/or may potentially experience financial stress that could result in the inability to fulfill repurchase obligations as a result of breaches of representations and warranties.”

As a mitigating factor for these concerns, The underlying loans benefit from representations and warranties backstopped by DLJMC, a wholly owned subsidiary of Credit Suisse, in the event of an originator’s bankruptcy or insolvency proceeding and if the originator fails to cure, repurchase or substitute loans for such breach.

Additionally, DBRS said the geographic concentration is relatively moderate compared to some other jumbo securitizations, with California representing 49.8% of the pool and the top three states representing 57.5%. Florida ranks second with 3.95% of the underlying properties and Virginia ranks third with 3.7%.

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