RWT Holdings’ upcoming prime residential mortgage-backed securities (RMBS) will raise $637.4 million in securitized bonds, securitized by the largest mortgage pool balance this year, and a pool that is entirely first lien and primarily agency underwritten.
The deal, Sequoia Mortgage Trust, series 2026-INV4, will issue class A senior and class B subordinate notes, with an expected closing date of August 26, according to ratings analysts at Kroll Bond Rating Agency.
SEMT 2026-INV4’s notes are expected to pay coupons including 5.00%, 5.50% and 6.00% on the super senior tranches, according to KBRA. One super senior, floater exchangeable tranche will pay 5.39%, the rating agency said. Other coupons range to 6.15% through the A25 tranches, according to KBRA.
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Credit enhancement on those notes are generally 15.00%, except for the A-19 through A-25 notes, which have enhancement levels of 10.85%, according to KBRA. The subordinate notes benefit from enhancement levels including 6.85% on the B1 tranche to 1.00% on the B5 notes, KBRA said.
More than 1,550 loans make up the collateral pool, and a large, 75.2%, is comprised of investment properties, according to the rating agency.
In the prime pool, borrowers have a weighted average (WA) score of 767, and leverage is moderate, at 70.4%. The mortgages have a non-zero WA annual income of $391,595. Borrowers have WA liquid reserves of $763,344, KBRA said.
The transaction calls for full principal and interest advance, which will advance scheduled principal and interest payments on behalf of delinquent borrowers, although that would depend on whether the transaction can recover those amounts. This normally increases the likelihood of loss severities, relative to prior SEMT transactions with the stop-advance feature, KBRA said.
Yet the rating agency did notice that in previous SEMT deals, with the stop advance feature, the deals “would include the balance of the stop advance mortgage loans in the applicable credit support percentages” for the subordinate tranches. That is not the case this time round, so with all else being equal, SEMT 2026-INV4’s subordinate classes will be less likely to be locked out from principal allocations. Only realized losses will affect the ACSP, not delinquencies.
KBRA assigns AAA ratings to the A1 through A31 tranches. Classes B1, B2, B3, B4, and B5 received ratings of AA+, A+, BBB+, BB+ and B+, respectively.