The pool comprises 58.4% of loans where the borrower maintains a primary residence, while 37.5% comprise an investor property. Additionally, 0.1% are safe-harbor-qualified mortgages (SHQMs), and 62.5% are non-qualified mortgages (non-QMs).
“There are 299 DSCR products in the pool (42.8% by loan count),” Fitch said in the report. “These business-purpose loans are available to real estate investors that are qualified on a cash flow basis, rather than DTI, and borrower income and employment are not verified.
“Compared to standard investment properties, for DSCR loans, Fitch converts the DSCR values to a DTI and treats them as low documentation. Fitch’s expected loss for these loans is 27.4% in the ‘AAAsf’ stress, which is driving the higher pool expected losses due to the 29.4% weighted average concentration.”
Want to make your inbox flourish with mortgage-focused news content? Get exclusive interviews, breaking news, industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
Source: mpamag.com