KBRA Releases Research – Laying the Foundation: The Evolution of RTL Lending

NEW YORK--(BUSINESS WIRE)--KBRA releases research providing an overview of the residential transition loan (RTL) lending and securitization market. The report covers recent issuance and collateral trends, differences between rated and unrated RTL securitizations, pricing spread performance, transaction structures, eligibility criteria, and performance to date.

RTLs, also known as “fix-and-flip” or residential bridge loans, have expanded as a residential mortgage-backed securities (RMBS) asset class in recent years. While RTLs remain a niche segment of private-label RMBS, representing less than 5% of expected full-year (FY) 2026 private-label securities (PLS) issuance, the market has scaled meaningfully from its infancy in 2018. Total RTL securitization volume increased sharply in 2024 and has remained elevated, reflecting the continued expansion of RTL originations, supported by demand for capital to renovate or add residential inventory and the broader use of securitization as a funding channel.

Key Takeaways

• RTL securitization has scaled meaningfully, with total annual issuance rising to $6.2 billion in 2024 and $5.5 billion in 2025, approximately 3x the 2023 levels. We project FY 2026 issuance to total approximately $4.8 billion, down 12% year-over-year, and rated issuance to reach approximately $3.5 billion, representing approximately 73% of projected 2026 RTL securitization volume.
• Observed performance has been constructive to date, with 60+ days delinquent (DQ), foreclosure (FC), bankruptcy (BK), and real estate owned (REO) levels near 5.9% for rated deals and 7.2% for unrated deals at 22 months, while FC, REO, and BK levels remain near 3% and cumulative net losses (CNL) remain below 0.1%.
• Rated RTL transactions have generally priced tighter and in a narrower range than unrated deals. In the 2025 through mid-2026 sample, first-cash-flow (FCF) spreads ranged from 140 basis points (bps) to 210 bps and averaged approximately 165 bps for rated transactions, versus 180 bps to 325 bps and an average of roughly 226 bps for unrated transactions. As more rating agencies participate in the sector, increased transparency and comparability across rated deals could further support investor acceptance and execution over time.
• RTL eligibility criteria provide guardrails for revolving collateral pools, with common limits around loan size, leverage, unfunded commitments, construction exposure, and guarantor credit quality. In the reviewed sample, rated deals generally showed stronger FICO thresholds, while wider ranges for ground-up construction, bridge only/no-rehab exposure, and borrower concentration reflected issuer-specific collateral strategies.

Click here to view the report.

Related Publications

• RMBS: U.S. Residential Transition Loan Securitization Rating Methodology
• Fidelis Mortgage Trust 2026-RTL2 (FIDL 2026-RTL2) New Issue Report
• 2026 U.S. RMBS Sector Outlook: Normalizing Credit and Growing Issuance

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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