Sequoia Mortgage Trust 2021-9 is preparing to issue $510 million in residential mortgage-backed securities (RMBS) notes secured by fixed-rate mortgages, all of which have been designated a qualified mortgage (QM) loans.
Wells Fargo Securities is lead underwriter on the transaction, which being sponsored by RWT Holdings, Inc. The notes are expected to garner ‘AAA’ ratings on the four senior classes, while the subordinates will most likely be assigned ‘AA-’ through ‘BB-’ ratings.
The A-9, A-12 and A-18 classes have credit enhancement levels of 15%, while the A-21 classes have a credit enhancement level of 4%.
The collateral pools consists of 578 loans totaling $510 million, and the trust uses a senior-subordinate, shifting-interest structure that helps maintain subordination for a longer period of time, should losses occur later in the life of the deal. The subordinate classes will receive scheduled principal only, and will not receive any unscheduled principal or prepayments for five years, Fitch said.
Fitch did note several positive aspects of the deal. The rating agency views Redwood Residential Acquisition Corp., which acquired the underlying pool of loans from a variety of originators, as an above-average aggregator. Fairway Independent Mortgage Corporation, an originator whose loans account for 7.5% of the collateral pool, is the largest originator recorded on the deal.
Fitch expressed a lot of confidence in Redwood’s operations, saying the company has a robust sourcing strategy and maintains experienced senior management and staff, plus strong risk management and corporate governance controls, plus a robust due diligence process, Fitch said.
The collateral’s weighted average (WA) original LTV is 65.2%, and a WA model FICO score of 773. The debt-to-income ratio is 32.2%, Fitch said.
The vast majority of loans in the pool are primary residences, while 94.9%, are single-family property. The rest of the pool, 4.7%, is mostly comprised of condominiums.
Fitch noted that California is the state with the largest concentration of loans in the pool, 39.5%.
The notes have an interest rate of 1.5%, and have a final scheduled maturity of January 2052.
