The GS Mortgage-Backed Securities Trust is preparing to raise $572 million in the capital markets, in a deal that sticks to the script of previous jumbo MBS prime deals.
The current deal is similar to previous deals issued from the program shelf, with no material differences in its cash priorities, according to a pre-sale report from FitchRatings. According to Fitch, mortgage cash flow and allocation is based on a senior subordinated interest structure, in which subordinate classes receive only scheduled principal and cannot receive any unscheduled principal or prepayment for five years.
Only 1% of loans in the underlying pool are agency compliant loans, United Wholesale Mortgage, Fairway Independent Mortgage Corp. and loandepot.com being responsible for most or all of the pool origination. Shellpoint Mortgage Servicing and Cenlar will service the loans, according to Fitch. Wells Fargo has signed on as a master repairman.
GS Mortgage-Backed Securities, 2022-PJ5 stood out in one area, however: its size. Its pool balance of $572 million is lower than recent deals in the GSMBS program and the $1.3 billion average for the main industry from 2020 to 2022, according to Fitch.
All ratings have credit enhancement levels of 15%, with an expected final maturity date of October 2052. Ratings range from “AAA” on the $243 million Class A-7 notes to “AA+” on $55.4 million Class A-34 notes. Remarks.
Under the capital structure, subordinate classes only receive scheduled principal and cannot receive principal or unscheduled prepayments for five years. This feature helps maintain subordination for a longer period if losses occur later in the duration of the trade.
While the ratings are expected to have high ratings backed by high-quality collateral, Fitch cited a potentially negative credit aspect of the deal, stemming from house price inflation and Fitch’s own updated view on sustainable house prices. Pool home prices are 9.2% above a long-term sustainable level, down from 9.2% nationally in April 2022, down 1.4% since last quarter, the rating agency said.