NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency, Inc. (KBRA) assigns preliminary ratings to six classes of mortgage-backed notes from Ellington Financial Mortgage Trust 2019-2 (EFMT 2019-2), a $267.2 million non-prime RMBS transaction.
Ellington Financial Mortgage Trust 2019-2 (EFMT 2019-2) is a non-prime RMBS transaction sponsored by EF Holdco WRE Assets LLC (EF Holdco). The underlying collateral, comprising 613 residential mortgages, is characterized by moderate borrower leverage and a notable concentration of alternative income documentation, with 60.0% of the loans underwritten using 12- or 24-month bank statements. Ellington has purchased the loans in the pool solely from its affiliated originator LendSure Mortgage Corp. (LendSure).
Approximately 75.7% of the loans were categorized as non-qualified mortgages (Non-QM). The remaining loans (24.3%) were categorized as being exempt from the ATR/QM rule having been originated for a business purpose (i.e. investment properties). EFMT 2019-2 also includes loans originated to borrowers with prior credit events (8.0%) and foreign national borrowers (6.6%), where at least one borrower was a foreign national or non-permanent resident alien.
The pool has a non-zero weighted average (NZWA) original credit score of 708 and a WA debt-to-income (DTI) ratio of 37.3%. Borrowers in EFMT 2019-2 exhibit considerable equity in each mortgaged property, as evidenced by the WA original loan-to-value (LTV) and combined LTV (CLTV) ratios of 68.6% and 68.7%, respectively. The pool has a WA loan age (WALA) of approximately nine months, and it includes both fixed rate mortgages (FRMs, 19.2%) and hybrid adjustable rate mortgages (ARMs, 80.8%). Most of the FRMs possess 30-year terms (86.0%), while the pool’s ARM loans include initial fixed rate periods of five (0.7%), and seven (99.3%) years. Approximately 15.0% of the mortgages have an interest-only period, most of which last for the first five or seven years of the loan term.
KBRA’s rating approach incorporated loan-level analysis of the mortgage pool through its Residential Mortgage Default and Loss Model, an examination of the results from third-party loan file due diligence, cash flow modeling, analysis of the transaction’s payment structure, reviews of key transaction parties and an assessment of the transaction’s legal structure and documentation. This analysis is further described in our U.S. RMBS Rating Methodology.
To access ratings, reports and disclosures, click here.
Related Publications: (available at www.kbra.com)
- EFMT 2019-2 Pre-Sale Report
- EFMT 2019-2 Tear Sheet
- U.S. RMBS Rating Methodology
- Residential Mortgage Default and Loss Model
- U.S. RMBS Rating Methodology for Assessing Non-QM Risk
- Global Structured Finance Counterparty Methodology
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.