Kroll Bond Rating Agency, Inc. (KBRA) assigns preliminary ratings to six classes of mortgage pass-through certificates from Western Asset Management Companys second non-prime RMBS securitization, Arroyo Mortgage Trust 2018-2 (ARRW 2018-2).
Arroyo Mortgage Trust 2018-2 (ARRW 2018-2) is a $240.7 million RMBS transaction sponsored by Arroyo Mortgage Acquisition Company II LLC (AMAC II), an affiliate of Western Asset Management Company (WAMCO). The ARRW 2018-2 pool, comprised of 661 mortgages, includes both seasoned performing (pre-implementation of the Ability-to Repay rule) and newly-originated non-prime collateral with a weighted average life (WAL) of 32 months. The loans were primarily underwritten using non-traditional income documentation sources to borrowers with substantial equity. The collateral pool contains both non-qualified mortgages (Non-QM) and loans that are exempt from the ATR rule such as: investor properties and loans originated prior to implementation of the Ability-to Repay rule.
The underlying collateral consists of hybrid adjustable rate mortgages (93.3%) and fully-amortizing fixed-rate loans (6.7%), including interest only loans (1.4%) with seven- or five-year interest only periods. Loans in the pool exhibit substantial borrower equity in each mortgaged property, as evidenced by the weighted average (WA) original combined loan-to-value (CLTV) of 59.5%. The non-zero WA original credit score is 743.
KBRAs 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 transactions payment structure, reviews of key transaction parties and an assessment of the transactions legal structure and documentation. This analysis is further described in our U.S. RMBS Rating Methodology.
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Related Publications: (available at www.kbra.com)
- ARRW 2018-2 Trust Pre-Sale Report
- ARRW 2018-2 Trust Tear Sheet
- U.S. RMBS Rating Methodology
- Residential Mortgage Default and Loss Model
- U.S. RMBS Rating Methodology for Assessing Non-QM Risk
- KBRA Expects TRID to Have Limited Impact on RMBS Enhancement Levels
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About KBRA and KBRA Europe
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, is 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.
Kroll Bond Rating Agency, Inc.
Patrick Gervais, Senior Director
Mahdavian, Senior Director
Kahan, Managing Director