Morgan Stanley Launches $ 317 Million Residential MBS

A pool of 344 residential mortgages will secure a $ 317 million mortgage-backed securities deal from the Morgan Stanley Residential Mortgage Loan Trust, 2021-3.

The pool consists of blue chip, jumbo, compliant and non-compliant loans, all of which have been designated as qualifying mortgages.

Morgan Stanley will act as loan aggregator, with Quicken Loans being the largest originator in the pool. Other Morgan Stanley entities will play several key roles in the deal, including Morgan Stanley & Co., which serves as the initial purchaser of the notes. Morgan Stanley Mortgage Capital Holdings, LLC, is acting as transaction sponsor, seller and asset manager, according to an assessment by the Kroll Bond Rating Agency.

The transaction’s capital structure includes five categories of senior notional interest-only notes, four of which correspond to super senior, sequential and pass-through categories. Both FitchRatings and KBRA are expected to assign “AAA” ratings to senior ratings and notional classes.

Six grade classes ensure subordination to senior grades. All of the capital structure notes have a legal final maturity date of June 2051.

Additionally, all MSRM 2021-3 mortgages are qualifying mortgages and comply with all of the rules that came into effect on March 1, 2021.

Mortgage originators, which included Maxex, Reliant Bank, Quicken Loans, Cross Country Mortgage, extended the loans after the World Health Organization declared a global pandemic in March 2020, KBRA said.

KBRA wrote that it expects loans taken out after March 2020 to benefit from positive screening and stricter employment verification standards. The underwriting schedule is offset by an 18.5% self-employment percentage, which KBRA says is slightly lower than the combined average 19.4% top-notch self-employment percentage of the combined RMBS for 2020 and 2021. In Generally, the self-employed have been hit harder by the pandemic-induced economic downturn than workers with other types of jobs.

In addition to a lower concentration of independent borrowers, the collateral pool also consisted of borrowers with an Initial Weighted Average (WA) credit score of 776 and a debt-to-income ratio of 31.6%. The borrowers also had significant levels of equity in the properties backing the mortgages, giving the portfolio an initial loan-to-value (WA) ratio of 68.2%.

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