A collateral pool comprised entirely of so-called business purpose investor loans granted through a business purpose underwriting program will secure a $225.7 million, mortgage-backed securities (MBS) transaction.
Barclays Capital and Credit Suisse Securities are underwriters on the transaction, for which Visio-Beach Point Mortgage Trust is the sponsor and seller. Other Visio entities are playing key roles on the deal, including originator and depositor, according to S&P Global Ratings.
The underwriting program for the 688 business purpose loans assessed the mortgages using debt-service coverage ratios on actual, or estimated, rents from the property, S&P said. The collateral loans are exempt from ability-to-repay (ATR) rules. Mortgages in the pool have a weighted average FICO score of 749, plus a weighted average (WA) current combined LTV of 75.5%, the rating agency said.
The A-1, A-2 and A-3 senior notes, which are fixed rate, have credit enhancement levels of 40.2%, 31.5% and 20.5%, respectively, according to S&P.
S&P did note a few important characteristics about the collateral pool, including the fact that about 42.4% of the financing types are cash-out loans. The pool also includes a large number of short-term leases in the pool, about 65.5%.
Borrowers with multiple properties in the securitization, including one loan that is cross-collateralized across four properties, account for 28.4% of the pool. On average, the loans had a balance of $328,131.
On a weighted average basis, the collateral pool has a current cumulative loan-to-value ratio of 75.5%, a current rate of 6.2% and four months of seasoning, S&P said.
Single-family homes—including planned-unit development and townhouses—accounted for 68.5% of the property types. Two-to four-family homes accounted for 18.9% of loans. Adjustable rate-loans are 8.2% of the collateral pool, and loans with interest-only features accounted for 7.0%, S&P said.
Visio 2022-1 Trust will issue notes through a senior-subordinate structure, and such notes will benefit not only from that structure, but excess cash flow as well, S&P said.
S&P expects to assign ratings ranging from ‘AAA’ to ‘A’ on the senior notes A-1 through A-3 that will repay investors on a pre-rata basis; and ‘BBB’ on the mezzanine/sequential note class to ‘B-’ on the B-2 class.