Dec 10, 2024, 1:20 PM
Dec 10, 2024, 1:20 PM

KBRA's ratings shake up the mortgage-backed notes market

Highlights
  • KBRA has assigned preliminary ratings to a total of 20 classes of notes from a recent mortgage-backed securities transaction.
  • The transaction is valued at $451.4 million and entirely comprises newly originated closed-end second lien mortgages.
  • The ratings assignment is crucial for determining market reactions and investor confidence in mortgage-backed securities.
Story

In December 2024, Kroll Bond Rating Agency, LLC (KBRA) assigned preliminary ratings to twenty classes of mortgage-backed notes originating from RCKT Mortgage Trust 2024-CES9. This transaction involves a total of $451.4 million in residential mortgage-backed securities (RMBS), affirmatively structured and sponsored by Woodward Capital Management LLC. The underlying pool consists entirely of newly originated closed-end second lien mortgages, representing 100% of the pool. Each of these mortgages is characterized by fully amortizing and fixed-rate terms with more than 94% of the loans set at 20 years. These structures aim to provide investors with a reliable return on investment amid fluctuating economic conditions, reflecting an adaptive approach in the current financial climate. The loan pool is quite seasoned, with an average seasoning period of less than one month, and comprises 5,142 loans originated solely by Rocket Mortgage, LLC. The interest rates for these mortgages are predominantly fixed at 5.5% for 10-year terms and 94.5% for 20-year terms, indicating stable financial expectations from the borrowing community. The ratings provided by KBRA will play a crucial role in determining the market perception of these notes, influencing investment decisions and pricing mechanisms within the financial markets. The initiative by KBRA comes amidst a backdrop of increasing scrutiny on mortgage-backed securities markets due to the recent inflationary pressures and changes in the economic landscape. Such financial indicators prompt investors to seek assurance in ratings that reflect creditworthiness and the likelihood of timely payment defaults. KBRA's assignment of ratings is critical for both the originators who seek favorable terms and the investors reliant on these ratings for assessing risk before purchasing these financial products. In summary, the ratings signify confidence in the quality of the underlying collateral, which is essential for fostering investor trust and market efficiency. As more information becomes available regarding these loans and their performance over time, the financial community will closely monitor the implications of these ratings on market dynamics and investor strategies moving forward.

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