A pool of 835 mortgage loans, including those that are first- and second lien, adjustable-rate and fully amortizing, will back $343.9 million in notes coming to market from sponsor Park Capital Management.
PRKCM 2026-AFC4 Trust is expected to issue the notes through about 11 tranches of class A and B notes, when it closes on July 8, according to S&P Global Ratings.
J.P. Morgan Securities is the deal's lead underwriter, the rating agency said.
The series of seven class A tranches will repay noteholders on a pro rata basis and includes first- and last-cash flow tranches, which are initially exchangeable, according to S&P, while mezzanine and subordinate tranches will repay sequentially.
Credit enhancement levels included 30.25% on the most senior tranche, the A-1A notes, while the A-1B through the A-1LCF tranche benefit from enhancement levels of 20.25%, the rating agency said.
PRKCM 2026-AFC4 comes to market with several differences from its predecessor, the PRKCM 2026-AFC3. The average loan balance is $411,953, up from $390,245 on the previous deal, according to analysts at Kroll Bond Rating Agency.
S&P notes that borrowers had a weighted average (WA) FICO score of 756, a current rate of 6.73%, and a debt-to-income (DTI) ratio of 34.7%.
There is also a much higher portion of mortgages that were underwritten using alternative documentation (63.1%), including bank payments, pay stubs and profit and loss statements and debt-service coverage ratio (DSCR) underwriting, according to KBRA. Of the alternative documentation used, underwriters leaned more heavily on bank statements looking back 12-23 months, which accounting for 41.6% of that group, KBRA said.
PRKCM 2026-AFC4 includes a provision to prevent the servicer or servicing administrator from forwarding any interest and principal on loans that are delinquent by 90 days or more, KBRA said.
Other credit enhancements include excess spread to cover any principal shortfalls, S&P noted. If unused, it will be released to XS class noteholders during the period that the transaction receives it.
S&P assigns AAA to the A1 notes; AA to the A2 notes; A+ to the A3 tranche; and BBB, BB- and B to classes M1, B1 and B2, respectively.
KBRA assigns AAA to the A1 notes; AA and A to classes A2 and A3; and BBB, BB- and B- to the M1, B1 and B2 tranches, respectively.
