Let Valuation Tech Help Improve Your Collateral Valuation

Join this webinar to learn how technological advancements in valuation provide solutions to help lenders and servicers deliver more comprehensive offerings to their clients.

Talking proptech with FinLedger Director Holden Page

In this episode, Page discusses the hottest topics coming across FinLedger’s news desk. Topics include: the online banking market, what’s happening in the proptech space and recent private market deals.

With a reinvigorated CFPB, what’s next for the NYDFS?

While the CFPB is reinvigorated under the Biden administration, there’s plenty of room for it to retake a leading role and coordinate with the NYDFS.

Does your CRM hurt or help the customer experience?

In real estate, data is king. The more you leverage your own data the better off your agents or loan officers will be because they’ll be able to identify, target and create better customer experiences.

Investments

FirstKey prepping second jumbo mortgage securitization

Features "single layer of protection" against breaches of reps and warrants

After bringing its first prime jumbo mortgage securitization to market in November, FirstKey Mortgage is back with its second such offering.

The company is a nonbank correspondent lender which also purchases and aggregates loans. Late in 2013, FirstKey launched its conduit for non-conforming mortgage business.

FirstKey is also a subsidiary of FirstKey Holdings, which is indirectly majority-owned by funds managed by Cerberus Capital Management.

The company’s first jumbo securitization was backed by 401 first-lien, jumbo residential mortgage loans with an aggregate outstanding principal balance of $286 million.

Its second securitization is slightly larger, featuring a total principal balance of $293 million on 407 loans. The loans carry an average unpaid balance of $719,941.

The underlying loans carry a weighted average original FICO score of 763, WA combined loan-to-value of 68.1%, and WA debt-to-income ratio of 32.3%.

DBRS and Fitch Ratings both issued presale reports on the offering and cited the high quality of the collateral as reasons for awarding the offering AAA ratings.

“A number of borrowers in this pool have significant liquid assets. Borrowers with substantial liquid reserves are generally better positioned to withstand a temporary income disruption and have a lower risk of default,” Fitch noted in its presale report.

“Approximately 43% of the borrowers have liquid reserves exceeding five years of monthly mortgage payments and approximately 9% have reserve amounts greater than their mortgage loan balance,” Fitch continued. “The WA reserve to loan ratio is roughly 39.9%. The WA annual income for borrowers in this pool is approximately $326,400.”

Both DBRS and Fitch called out the deal’s unique representation and warranty framework as a potential concern.

“Unlike most prime jumbo conduit securitizations issued recently where the aggregators often provide representations and warranties backstop in the event of an originator’s bankruptcy or insolvency proceedings, this transaction relies solely on EverBank (for the loans originated by EverBank) or FirstKey (for all other loans) to honor representations and warranties, thus creating only a single layer of protection against breaches of representations and warranties,” DBRS noted in its presale.

Fitch shared similar concerns. “While the rep, warranty and enforcement mechanism framework in this transaction is viewed positively by the agency, FirstKey and EverBank do not meet the investment-grade threshold for the construct to be what Fitch considers a full framework as set forth in its rep and warranty criteria as described in the agency’s US RMBS Master Rating Criteria report dated July 2014,” Fitch said in its report.

“As a result, Fitch made an adjustment to the pool’s loss expectations to account for the added default and loss exposure resulting from the rep provider’s potential inability to repurchase loans due to breaches.”

DBRS noted the clean payment histories of the underlying borrowers as a positive of the deal.

"The pool is on average three months seasoned, with a maximum age of 12 months. The payment histories on the loans are substantially clean,” DBRS said. “Except for two loans that had a previous servicing transfer-related payment disruption, no other loans have had prior delinquencies since origination. DBRS does not generally treat servicing transfer-related payment disruptions as delinquencies in the loss model, if such delinquencies are cured shortly.”

Both Fitch and DBRS also cited FirstKey’s inexperience as an aggregator and securitizer as a potential concern.

“This is the second transaction issued by FirstKey Mortgage. FirstKey launched their conduit for non-conforming mortgage business in late 2013 and therefore has a limited and unproven track record of acquiring mortgage loans through either a flow or bulk basis,” Fitch noted.

“Fitch conducted an aggregator review and it is Fitch’s opinion that FirstKey meets the industry standards needed to source mortgage loans and has an overall assessment of Average.”

According to DBRS’ report, the top originators for the mortgage pool are CMG Mortgage (14.3%); EverBank (8.3%); Bridgeview Bancorp (5.7%); Excel Mortgage Servicing d/b/a Impac Mortgage Corporation (5.2%); and various other originators, each comprising less than 5% of the mortgage loans.

Most Popular Articles

Will we ever see a “normal” housing market again?

The question on everyone’s minds: When will this hot housing market cool down? Arch MI investigates this and more in its Spring Housing and Mortgage Market Review.

Jun 22, 2021 By

Latest Articles

Mortgage rates jump back up to 3.02%

The average 30-year fixed-rate mortgage rose nine basis points from the week prior to 3.02%, according to data released Thursday by Freddie Mac‘s PMMS. This is the first time in ten weeks mortgage rates have risen above 3%.

Jun 24, 2021 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please