Starwood’s $ 465 million MBS includes FEMA disaster sites
Starwood Non-Agency Lending, LLC is preparing a Mortgage Backed Securities (MBS) deal that will introduce $ TK in MBS through the Starwood Mortgage Residential Trust, 2021-4, in one of the increasingly rare transactions with an exposure to Libor.
Starwood Non-Agency Lending’s guarantee consists of 24.5% floating rate loans that benchmark one-year Libor, according to Fitch Ratings. Other adjustable rate loans refer to the one-year Treasury and the one-year Guaranteed Overnight Financing (SOFR) rate.
Otherwise, 30-year, fixed-rate, fully amortizing loans make up the majority of loans, 59.3%, according to Fitch.
The pool consists of mixed loan types. Approximately 14.2% of the loans in the pool are designated as qualifying mortgages, while approximately 34.9% are designated as non-qualifying mortgages. About Fifty-one percent is investment property not subject to the Ability to Payback (ATR) rule, Fitch said.
With a balance of approximately $ 465.3 million, some 915 loans secure the certificates. Third-party mortgage originators represent the vast majority of originators, including Luxury Mortgage Corp., HomeBridge Financial Services, Impac Mortgage Corp. and United Shore Financial Services. These originators represent 83.3% of the pool’s loans, Fitch said.
Fitch also noted that 96 loans are in a geographic area that the Federal Emergency Management Agency (FEMA) has declared a disaster area for individual assistance, according to Fitch. As of September 8, however, repairers for the deal confirmed that none of the 96 houses had sustained any damage, so the presence of the houses on the deal is not likely to impact the transaction, Fitch said.
According to Fitch, various third-party originators, who each contributed less than 10% of the loans to the pool, issued the remaining 16.7% of the loans.
Borrowers have strong credit profiles, with a weighted average FICO score of 734 and an original combined loan-to-value ratio of 68.3%. According to the rating agency, the typical debt-to-income ratio (DTI) is 46%. Still, Fitch assumed a higher DTI, 55%, for depletion loans and for converting the debt service coverage ratio to a DTI for DSCR loans.
In terms of geographic concentration, 48% of the pool’s loans relate to properties in California. Meanwhile, the largest concentration of MSA is Los Angeles-Long Beach-Santa Ana, California at 27.4%. The second highest MSA representation is an area that covers New York, northern New Jersey, Long Island, and Pennsylvania, accounting for 23.5%.
Fitch plans to assign a range of ratings, including “AAA” ratings to the $ 357.5 million Class A-1 Notes and “BB” to the $ 12.5 million B-1 Notes.
All notes have a final maturity of August 2056.