A pool of non-prime residential mortgages will collateralize $328.3 million in residential mortgage-backed securities (RMBS), through the CROSS 2025-H10 Mortgage Trust.
The transaction will issue notes through about nine tranches of class A, M and B notes, according to analysts at Kroll Bond Rating Agency. The notes will repay investors through a hybrid pro rata and sequential basis, with the senior notes repaying pro rata.
The A1A notes will benefit from credit enhancement levels equaling 31.65% of the note balance, KBRA said. The A1B and A1 notes enjoy credit enhancement levels of 21.65%. After that, credit enhancement levels range from 13.40% on the A2 notes to 0.15% on the B2 notes, KBRA said.
J.P. Morgan Securities, Goldman Sachs, Piper Sandler & Co., and Nomura Securitis International will initially purchase the notes, KBRA said.
Monthly excess spread will confer credit enhancement to the notes, KBRA said, and while it will be released it will not be available as credit enhancement in future payment periods, the rating agency said.
CROSS 2025-H10 contains a step up to the coupon rate for the class A, which begins in January 2030. It equals the original class coupon rate, plus 1.00%, and is subject to a new weighted average rate cap, KBRA said.
At $328.3 million, the current pool balance, for series 2025-H10, is the smallest since the August, when the series 2025-H6 came to market, KBRA said.
Most of the non-prime home loans in the portfolio were underwritten using non-traditional means, specifically debt service coverage ratio (DSCR) and alternative documentation, including bank statements looking back at least 24 months, according to the rating agency.
Some 576 residential mortgages are in the underlying pool, KBRA said, and includes fixed-rate and adjustable-rate mortgages, at 84.7% and 15.3%, respectively. The mortgages have an average balance of $570,091.
A significant portion of the borrowers, 40.6% are self-employed, who have a median income of $251,876 and liquid reserves of $618,205, according to KBRA.
KBRA assigns AAA to the A1 notes; AA- to the A2; A- to the A3 notes; an BBB-, BB- and B- to the M1, B1 and B2, respectively.
