April 22, 2024

Sequoia Mortgage opens 2024 with $440.8 million MBS

A pool of 410 prime mortgages will serve as collateral for $440.8 million in mortgage-backed securities from the Sequoia Mortgage Trust, the program’s first deal of the new year.

The mortgages are largely fully amortizing and fixed-rate, with 30-year terms and virtually all of them (99.6%) are considered qualified mortgage standards, based on the origination standards. Kroll Bond Rating Agency lists Stifel, and Raymond James & Associates as co-managers on the deal, while Morgan Stanley is the sole bookrunner, according to ratings analysts at the Kroll Bond Rating Agency. All three are initial note purchasers.

RWT Holdings is sponsoring the deal, which is slated to close on January 17, and the notes are finally slated to mature in January 2054, KBRA analysts said.

Some 410 loans, all of which are first-lien loans with a $1 million average balance, are in the collateral pool, KBRA said. They have a weighted average (WA) term of 359 months, and a WA coupon of 6.45%, the rating agency said. On a WA score, the mortgage borrowers have a credit score of 773, and an original loan-to-value ratio of 69.1%. Also on a WA basis, the borrowers have a debt-to-income ratio of 35.4%, and on a net-zero WA basis, borrowers have an annual income level of $507,167, the rating agency said.

The notes from Sequoia Mortgage Trust 2024-1 are highly rated, with triple-a ratings through most of the tranches. The transaction has three super senior tranches, a senior tranche and nine notional note tranches. Five subordinate tranches provide credit enhancement to the more senior notes, according to KBRA.

Also, the trust distributes scheduled principal on a pro rata basis. There is also a specified lockout period during which the subordinate classes do not receive any unscheduled principal. After the lockout period, according to KBRA, unscheduled principal is distributed to certificate holders on a pro rata basis among the related senior and subordinate classes. But even that pro rata allocation is contingent on the collateral meeting certain performance tests.

KBRA assigns AAA ratings to the super senior and senior support notes; AA+ to the B1 tranche; A to the B2 tranche; BBB to the B3 tranche and BB+ to the B4 tranche, the rating agency said.

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