loanDepot is no stranger to mortgage securitization, with its loans taking their place alongside other originators’ loans as pieces of many non-agency securitizations over the last few years.
But now, loanDepot is making a big move into the secondary mortgage market and launching its first mortgage-backed security, which is backed only by loanDepot loans.
Moody’s Investor Service is out with a presale report on loanDepot’s mortgage-backed securitization, which is called Mello Mortgage Capital Acceptance 2018-MTG1.
It takes the “Mello” name from the mello lending platform that loanDepot introduced last year. loanDepot later introduced mello Home, which connects pre-approved homebuyers with verified real estate agents in their local market.
Now, loanDepot is bringing mello to securitization as well.
Mello 2018-MTG1 is a securitization of 453 primarily 30-year, first-lien, fixed-rate prime residential mortgages. The loans in the securitizations carry a total unpaid balance of just under $300 million.
The collateral pool consists of 226 prime jumbo and 227 conforming high balance loans, all of which were originated by loanDepot.
In its presale, Moody’s notes the large size of the loans in the portfolio. The portfolio’s average loan size is $661,866, and the largest 20 loans in the portfolio make up approximately 10.1% of the total balance.
Despite the size of the some of the loans in the portfolio, the underlying borrowers display strong credit characteristics and have a “demonstrated ability to save and to manage credit,” Moody’s said.
According to Moody’s, the borrowers in this transaction have high FICO scores and sizeable equity in their properties. The weighted-average primary-borrower FICO score is 772 and the weighted average original combined loan-to-value ratio is 72.4%.
Additionally, all 453 loans are designated as qualified mortgages either under the QM safe harbor or the GSE temporary exemption under the Ability-to-Repay rules.
The WA debt-to-income ratio for the pool is 33.3%, which includes 14 loans out of 453 loans with a DTI greater than 43%. The greatest DTI was 44.8% for a borrower with the most recent FICO of 743 and a CLTV of 56%, Moody’s said.
Due to the high quality of the underlying pool and other factors, Moody’s awarded more than $250 million in AAA ratings to the deal.
According to Moody’s report, approximately 78.2% of the properties backing the underlying mortgages are located in five states: California, Massachusetts, Washington, Colorado and New Jersey, with 49.8% of the properties located in California.
The top five MSAs by loan balance are Los Angeles (18.5%), San Francisco (12.7%), Boston (9.0%), Seattle (7.2%) and New York City (7%).
One other point of caution, Moody’s notes, is the number of borrowers in the pool that are carrying multiple mortgages.
According to Moody’s report, borrowers with two or more mortgages make up 30.3% of the pool. “Borrowers with more than one mortgaged property could be more likely to default than borrowers with one property especially in a distressed housing market,” Moody’s said. “However, high income borrowers with stable employment may support debt payments on vacation properties.”