RCKT Mortgage Trust 2022-4 is preparing to issue $337.9 million in mortgage-backed securities (MBS), backed by a pool of home loans less common these days – all qualifying mortgage loans made to prime borrowers at high median income occupying the properties they are going to buy.
Morgan Stanley and Bank of America Securities are the first purchasers of notes under the deal, which will issue notes through a senior-subordinated, rolling interest-payment structure, according to ratings agency Kroll Bond.
Woodward Capital Management is sponsoring the deal, for which Rocket Mortgage created the 330 collateral pool mortgages. Rocket Mortgages is also the repairer.
Borrowers in the pool are affluent, according to KBRA’s assessment. Along with a median annual income of $315,283, they typically have non-zero weighted average (WA) asset reserves of $406,325 and high residual income helps shore up ongoing payments to the underlying mortgages, which should benefit to tickets.
The entire underlying pool of mortgages received full documentation, according to KBRA. The borrowers had an initial WA credit score of 757 and a WA debt-to-income ratio of 34.3%. They also held a significant portion of the equity in the property, as suggested by the 76.0% WA loan-to-value ratio of the mortgages.
In addition to a collateral pool that benefits highly qualified borrowers, default and cumulative loss triggers also support continued note payments to RCKT Mortgage, 2022-4, according to KBRA.
KBRA plans to assign “AAA” ratings to much of the deal, from the $172.3 million initial super senior redeemable tickets to the $57.4 million Class A-16 tickets. The subordinated initial exchangeable notes are expected to be rated “AA+” and “A+”, and the subordinated notes are expected to be rated “BBB+” to “B+”, according to KBRA.
Mortgages are fixed rate, KBRA notes. While many aspects of the agreement are uniform, the purposes of the loans vary quite a bit. The majority of loans, 64.6%, are for the purchase of a home, while 27.9% are for cash financing, and 7.5% of the mortgage proceeds will be used for the refinancing, the KBRA said.
Geographically, California accounts for 21.2% of pool loans by balance, followed by Florida (16.4%), Texas (8.1%), Arizona (4.3%) and Colorado (4.2%) to complete the top five states represented. . The pool is more heavily diversified by metro area, with Los Angeles accounting for 6.1% of the pool, according to KBRA.