CROSS 2023-H2 is a $332.8 million private-label securitization, and consists of 656 residential mortgages, "including a meaningful concentration of collateral that KBRA considers to be 'non-prime,'" the report said.

So far this year, out of 100 prime and non-QM private-label deals issued, 57 have higher balances, with an average of $362 million, Jack Kahan, KBRA rating committee chair, said. For the 72 non-QM only, the average balance was also $362 million; 38 had a higher UPB.

"This is about average for 2023 though materially lower than average size in 2021," added Vadim Verkhoglyad, the vice president, head of research at dv01, which is owned by Fitch Group. "Deals that size have no material impact on the market or carry any specific connotations associated with this size."

Fixed-rate mortgages are 77% of the pool and hybrid adjustable rate loans the remaining 23%. All were originated by CrossCountry under its "Signature Expanded" guidelines. The bulk, 61.2% are considered as non-qualified mortgages, with the rest exempt from ability-to-repay and QM because they are business-purpose loans.

"We are pleased to scale our relationship with CrossCountry Mortgage through the close of CROSS 2023-H2," said Justin Gregory, portfolio manager at Hildene, in a press release. "Our ability to secure strong pricing for this securitization underscores Hildene's ability to execute on unique risk-adjusted investment opportunities for our clients amid a challenging market."

Most non-QM originators are still using the private-label market as their exit strategy, which they implement when they achieve a critical mass of product. Other options include whole loan sales to an investor like a life insurer or if they can, putting it on their balance sheet.

As of late, the pricing for PLS securitizations have improved as headlines about the failures of Silicon Valley Bank and First Republic Bank fade from memory.

"Non-QM senior spreads have fallen materially since the concerns of banking crises earlier this year," Verkhoglyad said.

The first deal under the Hildene-CrossCountry shelf was issued in July and consisted of $303.4 million of mortgages. But even though this is the second issuance in this agreement, KBRA noted CrossCountry's history with the product.

"CCM has been underwriting to these guidelines since 2020, with many loans previously sold into the Starwood securitization platform," the KBRA report said. "CCM originated approximately $3 billion in non-QM loans since 2018, and was previously a named originator in seven non-QM securitizations between 2021 and 2023."

Both KBRA and Fitch rated the A-1 tranches at "AAA."

Fitch, as part of its analysis, took a look at the "sustainable home prices" of the pool and considered that a negative factor in its ratings.

"Fitch views the home price values of this pool as 8.7% above a long-term sustainable level (versus 7.6% on a national level as of the first quarter, down 0.2% quarter-over-quarter)," it commented.

Fitch considered the large share of alternative documentation mortgage to be a negative as well.

Goldman Sachs structured this transaction, with Altas SP Partners participating as joint lead.

Hildene plans to issue its next non-QM securitization in the first quarter of 2024.