KBRA Assigns Preliminary Ratings to New Residential Mortgage Loan Trust 2024-NQM1 (NRMLT 2024-NQM1)

Rhea-AI Summary

KBRA assigns preliminary ratings to 6 classes of mortgage-backed notes from NRMLT 2024-NQM1 sponsored by Rithm Capital Corp. The non-prime RMBS transaction is worth $281.9 million, collateralized by 610 residential mortgages with borrowers possessing a non-zero WA original credit score of 739. The loans are seasoned approximately five months, with 98.9% fixed-rate mortgages and 1.1% adjustable-rate mortgages. NRMLT 2024-NQM1 has a WA original loan-to-value (LTV) of 73.6% and 8.4% of the pool has an initial interest-only period.

Credit Analyst

The assignment of preliminary ratings to mortgage-backed notes by KBRA is a significant indicator of the perceived creditworthiness and investment quality of these financial instruments. The credit score and loan-to-value metrics mentioned are crucial, as they influence the risk profile of the mortgage pool. A weighted average original credit score of 739 suggests a relatively high credit quality of borrowers, which generally correlates with a lower probability of default. The weighted average original loan-to-value (LTV) and combined LTV (CLTV) of 73.6% indicate a moderate level of borrower equity in the properties, which can act as a buffer against potential declines in property values.

Investors in RMBS rely heavily on these ratings to assess risk and the predominance of fixed-rate mortgages (98.9%) in this pool provides a degree of predictability in cash flows, as opposed to the less predictable adjustable-rate mortgages. The presence of interest-only periods in 8.4% of the pool may introduce additional risk, as borrowers are not required to pay down principal during this time, potentially leading to higher balance loans at the end of the period. Overall, the high credit scores and the LTV ratios are positive indicators for investors, but they must also consider the seasoning of the loans and the proportion of interest-only loans when evaluating the potential risk.

Real Estate Investment Analyst

The involvement of Rithm Capital Corp., a real estate investment trust (REIT), in sponsoring this non-prime RMBS transaction is noteworthy for stakeholders. As a REIT, Rithm Capital's performance is tied to the real estate market and the performance of its investments, such as NRMLT 2024-NQM1. The diversification of originators within the mortgage pool, including NewRez LLC, American Heritage Lending and LendSure Mortgage Corporation, may help mitigate originator-specific risks. However, the servicing by a single entity, NewRez LLC d/b/a Shellpoint Mortgage Servicing, could introduce servicer concentration risk.

For real estate investors and market participants, the seasoning of approximately five months is relatively short, which may not fully reflect the borrowers' payment patterns over a longer period. Nonetheless, the preliminary ratings provided by KBRA offer an initial assessment of the quality and stability of the investment. It is essential for investors to monitor subsequent performance and any updates to the ratings, as changes could impact the value of these securities and the income generated by a REIT like Rithm Capital.

Sustainability Analyst

While the article does not explicitly address environmental, social and governance (ESG) factors as they pertain to the NRMLT 2024-NQM1 RMBS transaction, it is important to consider that KBRA includes an ESG Global Rating Methodology in its analysis. The ESG considerations could become increasingly relevant for investors who are mindful of sustainability issues in their investment decisions. As ESG factors can influence the long-term performance and stability of investments, a comprehensive understanding of how these factors are integrated into the credit ratings could provide a more holistic view of the investment's risk profile. Investors should seek to understand the specific ESG factors that might affect the credit rating or rating outlook to make informed decisions aligned with their own ESG criteria.

NEW YORK--(BUSINESS WIRE)-- KBRA assigns preliminary ratings to 6 classes of mortgage-backed notes from New Residential Mortgage Loan Trust 2024-NQM1 (NRMLT 2024-NQM1), a $281.9 million non-prime RMBS transaction sponsored by Rithm Capital Corp. (formerly New Residential Investment Corp.), a publicly traded (NYSE: RITM) real estate investment trust (REIT). The underlying mortgages in the subject pool were originated by NewRez LLC (57.6%), American Heritage Lending (20.3%), and LendSure Mortgage Corporation (11.3%). In addition, all loans will be serviced by NewRez LLC d/b/a Shellpoint Mortgage Servicing.

NRMLT 2024-NQM1 is collateralized by a pool of 610 residential mortgages. Borrowers in NRMLT 2024-NQM1 possess a non-zero WA original credit score of 739 and exhibit a weighted average (WA) original loan-to-value (LTV) and a WA combined LTV (CLTV) of 73.6%. The loans are seasoned approximately five months and include both fixed-rate mortgages (FRMs; 98.9%) and adjustable-rate mortgages (1.1%). Approximately 8.4% of the pool has an initial interest-only period.

To access rating and relevant documents, click here.

Click here to view the report.

Related Publications

• NRMLT 2024-NQM1 Tear Sheet
• RMBS KBRA Comparative Analytic Tool (KCAT)

Methodologies

• RMBS: U.S. RMBS Rating Methodology
• Structured Finance: Global Structured Finance Counterparty Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1003294

View source version on businesswire.com: https://www.businesswire.com/news/home/20240222122194/en/

Analytical Contacts

Armine Karajyan, Senior Director, RMBS (Lead Analyst)

+1 646-731-1210

armine.karajyan@kbra.com

Genki Ono, Analyst

+1 646-731-1415

genki.ono@kbra.com

Abou Traore, Associate

+1 646-731-1258

abou.traore@kbra.com

Jack Kahan, Senior Managing Director, Head of Global RMBS (Rating Committee Chair)

+1 646-731-2486

jack.kahan@kbra.com

Business Development Contact

Daniel Stallone, Senior Director

+1 646-731-1308

daniel.stallone@kbra.com

Source: Kroll Bond Rating Agency, LLC

What is the total value of the non-prime RMBS transaction sponsored by Rithm Capital Corp.?

The non-prime RMBS transaction sponsored by Rithm Capital Corp. is worth $281.9 million.

How many residential mortgages collateralize NRMLT 2024-NQM1?

NRMLT 2024-NQM1 is collateralized by a pool of 610 residential mortgages.

What is the weighted average original credit score of the borrowers in NRMLT 2024-NQM1?

Borrowers in NRMLT 2024-NQM1 possess a non-zero WA original credit score of 739.

What percentage of the pool in NRMLT 2024-NQM1 has an initial interest-only period?

Approximately 8.4% of the pool in NRMLT 2024-NQM1 has an initial interest-only period.

Who are the main originators of the underlying mortgages in NRMLT 2024-NQM1?

The underlying mortgages in NRMLT 2024-NQM1 were originated by NewRez LLC (57.6%), American Heritage Lending (20.3%), and LendSure Mortgage Corporation (11.3%).