A pool of 796 mortgages will collateralize $368.7 million in mortgage-backed securities (MBS), to be issued through the BRAVO Residential Funding Trust, 2025-NQM2.
The deal issues notes through about 11 tranches of notes, all of which have a November 2064 final maturity date, according to a presale report from Fitch Ratings.
Most of the loans, 60.0% of the pool balance, are non-qualified mortgages, and 1.9% are safe-harbor qualified mortgages.
Loans underwritten to less than full documentation represent 88.8% of the pool. Forty-three percent of the underlying loans relied on income verification through 12- or 24-month bank statements. Also, 27.9% of the loans in the pool are debt service coverage ratio (DSCR) products, Fitch said.
One element give a mixed credit outlook to the transaction, which is that the servicers—Citadel, NewRez and Selene Finance—will not advance any delinquent principal and interest. That will reduce loss severities, since a lower amount will be repaid to the servicer should liquidation proceeds get prioritized to cover principal repayment over accrued interest that has not been paid.
The loans in the 2025-NMQ2 collateral pool do adhere to the Consumer Financial Protection Bureau's ability to repay standards, though, which reduces default risks due to a lack of affordability, misrepresentations or other conditions.
BRAVO's structure will repay principal on a hybrid pro rata, senior-subordinate basis. The senior notes will repay on a pro rata basis, while shutting out the subordinate bonds from principal payments until the balance in all the senior classes pay down to zero.
The structure also has a step-up feature, which calls for interest rates on classes A1A, A1B, A2 and A3 will increase by 100 basis points after four years—subject to the net weighted average coupon.
Barclays Capital is lead underwriter on the deal.
As for the portfolio, the loans have an average loan balance of $463,308, with an original loan-to-value ratio of 72.2%.
Fitch assigns AAA to the A1A and A1B notes; AA to the A2 notes; A to the A3 notes; BBB- to the M1 notes; and BB and B to the B1 and B2 notes.
