WinWater Home Mortgage brings third jumbo RMBS to market

$263.68 million offering receives AAA ratings from DBRS

After bursting onto the scene with its first prime jumbo residential mortgage-backed securitization in June, WinWater Home Mortgage is set to bring its third jumbo RMBS to market soon.

WinWater Mortgage Loan Trust 2014-3 is backed by a pool of 356 loans with a total principal balance of $263,678,317. The average loan balance is $740,669 and the borrowers carry a weighted average FICO score of 764 and a weighted average debt-to-income ratio of 32.9%.

The high quality of the borrowers and the collateral is one of the main reasons that DBRS awarded AAA ratings to the majority of the securitization’s classes.

According to DBRS’ presale report, the borrowers carry a weighted average original combined loan-to-value ratio of 71.7%, which indicates that the borrowers have “considerable” equity in their homes.

The borrowers also possess clean payment histories as well. “The pool is on average four months seasoned, with a maximum age of 18 months,” DBRS said. “Although some loans are relatively seasoned, the payment histories on the loans are clean. No loan has had prior delinquencies since origination.”

DBRS also noted the borrowers have high annual incomes and carry significant liquid reserves. “For the entire pool, the (non-zero) WA primary borrower income exceeds $276,000 annually,” DBRS said.

“The WA liquid reserves for the loans are approximately $337,000, which is enough to cover over six years of monthly mortgage payments. On average, 7.3% of the loans have liquid reserves higher than their current loan balance.”

One concern on the securitization’s potential is the lack of history for WinWater, considering that the company launched its first securitization just six months ago.

“WinWater was formed in July 2013 and is a relatively new securitizer of prime jumbo loans with limited performance history,” DBRS said. “As a mitigant, third-party due diligence was conducted on 100% of the loans. DBRS also conducted an aggregator operational risk assessment on the WinWater conduit and deems it to be an acceptable aggregator.”

WinWater, which refers to itself as “a residential mortgage conduit aggregator focused on opportunities in the non-agency jumbo sector,” acquired the loans from a variety of originators.

The originators for the mortgage pool are Prospect Mortgage (11.2%), Ditech Mortgage (10.1%), Skyline Financial (6.2%), Parkside Lending (6.0%) and various other originators, each comprising less than 5% of the mortgage loans.

FirstKey Mortgage acquired 11.4% of the mortgage loans in the pool from various originators or sellers and subsequently sold them to WinWater Acquisition Trust WF-1.

DBRS also issued a caution based on the relative inexperience or lack of financial backing of some of the originators.

“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,” DBRS said. “In addition, the remedies in this transaction have a backstop by an unrated entity.”

To address these factors, DBRS said that it adjusted the originator scores of the lenders downward to account for the potential inability to fulfill repurchase obligations or the lack of performance history.

DBRS also said that it conducted an on-site review of WinWater and “deems it to be operationally sound.”

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