COLT Mortgage Loan Trust launches $423.3 million in MBS

COLT 2022-6 Mortgage Loan Trust is preparing to issue $423.3 million in mortgage-backed securities (MBS), or certificates, in a transaction secured by a pool of 1,017 subprime loans.

The transaction will need to overcome several potentially negative credit factors, according to Fitch Ratings. For one, home prices in the current pool are 9.7% below a long-term sustainable level. Overall, the underlying fundamentals are not keeping pace with house price growth, which could exacerbate the supply-demand balance already in place due to low inventories.

Loans from the collateral pool are considered unqualified, although borrowers start out with a moderate credit profile, indicated by a model FICO score of 739. Borrowers have a model debt-to-income ratio of 46.5%, a loan /sustainable value of 78.0% and a combined LTV of 71.9%,k according to Fitch Ratings.

The loans were seasoned for about five months in total, the rating agency said.

About 79% of collateral pool loans were issued to borrowers without complete documentation. Some 34% of loans in the pool were taken out on bank statements to verify income.

Goldman Sachs is the lead underwriter of the COLT 2022-6 Mortgage Loan Trust, for which Select Portfolio Servicing will act as servicer on the notes, the rating agency said. The notes will be issued from a senior subordinated capital structure, and Fitch expects to assign ratings of “AAA” on the $298.6 million, on class A1 to “B” on the 18, $4 million, B3 notes, the rating agency said.

None of the notes has exposure to the LIBOR benchmark; interest rates are expected to be 4.65% on senior notes and 4.69% on subordinated notes.

The bonds have a final maturity of June 2067.

Only 44.5% of mortgaged homes in the pool would serve as the primary residence of the borrower, while investor properties make up 49.9% of the pool.

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