Rithm Capital’s latest residential mortgage loan securitization will raise $438.8 million in securitized bonds, selling them to investors through the 2026-NQM7 series of the New Residential Mortgage Loan Trust.
A pool of 890 million mortgages, primarily fixed rate and with about one month’s seasoning, will secure the bonds issued through a series of class A, M and B notes that includes a first cash flow (FCF) tranche and a last cash flow (LCF) tranche, according to analysts at Kroll Bond Rating Agency.
The FCF piece will get first priority among senior notes to receive principal payments, while the LCF tranche only receives payments after the FCF tranche is paid off, KBRA said.
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Otherwise, NRMLT 2026-NQM7 combines pro rata and sequential payment priorities, with the class A receiving principal on a pro-rata basis before principal is paid to the mezzanine or class B notes sequentially, the rating agency said.
KBRA assigns ratings of AAA to the A1 notes; AA+ and A to the A2 and A3 notes, respectively; and BBB, BB+ and B+ to classes M1, B1 and B2, respectively.
The deal is expected to close on June 12, with Morgan Stanley among a long list of initial note purchasers, which includes Barclays Capital, BMO Capital Markets and Deutsche Bank Securities.
All the senior A1 tranches, except the A1A, benefit from credit enhancement levels representing 23.06% of their note balances. The A1A tranche has a credit enhancement level of 33.06%.
Classes A2 and A3 have 16.80% and 9.00% in credit enhancement, respectively, KBRA said.
The pool was underwritten primarily through 12-month (31.8%) and 24-month (10.6%) bank statements, plus debt service coverage ratios (22.2%), according to KBRA.
NRMLT 2026-NQM7’s structure includes a 180-day stop advance provision, which prohibits the servicer, master servicer or the paying agent from forwarding any interest and principal on loans that are delinquent by 180 days or more, according to the rating agency.
The deal also benefits from excess spread.
The loans have an average balance of $543,605 and a weighted average (WA) coupon of 6.84%, and the pool has a debt-to-income ratio of 32.4%. Borrowers have a non-zero WA annual income of $1.4 million, and liquid reserves of $308,531, according to KBRA.