Towed Point Mortgage Trust plans to issue $247.7 million in notes

The Towd Point Mortgage Trust Transaction, 2022-EB01 is preparing to issue $247.7 million of mortgage-backed notes, secured by both beneficial interests in mortgages held by the trust and real estate.

It is the third publicly traded, non-agency securitization of its kind to come to market in more than a decade.

Loans in the underlying collateral pool are senior, non-performing and reproductive loans insured by the Federal Housing Administration, according to a pre-sale report from ratings agency Kroll Bond.

Initial ticket buyers include BofA Securities, JP Morgan Securities and Wells Fargo Securities, KBRA said. FirstKey Mortgage is acting as sponsor, vendor and asset manager of the transaction, for which it also serves as provider of representation and warranties.

Due to close on March 1, the deal is positioned as an early buyout from the Ginnie Mae Federal Housing Administration (FHA), in which FHA loans could be bought out from Ginnie Mae MBS. Once redeemed from GNMA pools, the servicer is relieved of the burden of making GNMA MBS advances on outstanding collateral. The servicer can also earn bonuses for returning reproductive loans in GNMA-eligible pools.

KBRA plans to assign ratings ranging from “AAA” on the $197 billion Class A notes to a “BB” rating on the $6.1 million Class M4.

The rating agency makes estimates on each mortgage’s default date to determine how long, in terms of months, the loans have had an outstanding balance during default, called default seasoning. By this measure, the weighted average (WA) default seasoning for the mortgage pool is around 11 months.

The mortgages also had approximately $11.1 million in pre-existing management advances as of the December 31, 2021 deadline.

Towd Point, 2022-EB01 has 2,177 loans in the pool, all of which are senior and have an average balance of $113,795. Almost all of the loans are fixed rate, 97.9%. On a WA basis, the mortgages have an initial term of 400 months, a remaining term of 266 months and a current rate of 4.29%.

In addition, the vast majority of the basin, 82.0%, is made up of single-family homes. The rest of the basin is fragmented into much smaller representations of townhouses, 7.6%; condominiums, 3.3%; prefabricated housing, 3.3%; two- to four-family houses, 2.6%; and the planned development of the unit.

In terms of borrower characteristics, the pool has a non-zero WA Updated FICO score of 589; an initial loan-to-value (LTV) ratio of WA of 93.3%; and a current LTV WA of 57.7%.

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