GCAT 2021-NQM7 Trust is preparing to issue $274.2 million in notes, including unrated classes, secured by a broad mix of residential properties. The pool includes a high concentration of loans underwritten with alternative documentation, and a property business purpose program.
Credit Suisse Securities and Barclays Capital are the deal’s initial note purchasers. Blue River Mortgage II, a non-QM mortgage vehicle, is sponsoring the transaction, according to Kroll Bond Rating Agency. The pool consists of 654 loans.
The notes will be issued from a sequential hybrid structure, and subordination and excess spread provides credit enhancement to the payment of notes, according to KBRA. The class A-1X certificates have a notional amount that is scheduled to reduce to zero in the transaction’s 41st month. After that, the transaction will see increased benefit from additional credit enhancement in the form of excess spread, KBRA said.
That arrangement has limits, however. Any monthly excess cash flow that exceeds current or previously applied losses will be released and not be available as future credit enhancement, KBRA said.
About 51.5% of the loans in the pool were underwritten using bank statements or profit & loss statements, and 20.8% were originated through an investment property business purpose program or where income was verified using asset depletion, according to S&P Global Ratings, which plans to rate the notes.
Notwithstanding the deal’s alternate underwriting methods, the rating agencies noted several positive characteristics about it. According to KBRA, fixed-rate mortgages (55.1%), make up the majority of the portfolio, and the rest fall into the adjustable-rate mortgage (44.9%), and approximately interest-only (7.2%) categories.
Geographically, a significant percentage of GCAT 2021’s pool balance is concentrated in California and New York, for a total of 64.7%. Florida (8.5%), New Jersey (4.4%) and Texas (3.0%). By metro area, New York City actually accounts for the highest concentration of the pool’s loan balance, with 33.5%.
On average, the average pool balance was $420,040. On a weighted average (WA) basis, the original loan-to-balance ratio is 67.5%; the original FICO score was 737; and the WA loan age was 22.9 months.
About 62.0% of the borrowers are self-employed, and the pool’s median income is $132,426.
About 500 loans of the loans, or 78.3%, have never received COVID-related forbearance assistance or deferment. Just 10.3% of the pool did participate in a forbearance plan, and the borrowers on those loans have repaid all past payments in full.
