Non-prime residential mortgages underpin $298.9 million in RMBS

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A pool of first-lien, non-prime mortgages will provide collateral for $298.9 million in residential mortgage-backed securities (RMBS) that Blue River Mortgage is bringing to market.

Known as GCAT 2025-NQM7 Trust, the transaction is expected to close on December 3, and has a meaningful concentration of non-qualified mortgages, including 23.6% considered non-QM; 37.7% that are safe harbor; and 2.5% of rebuttable presumption, according to analysts at Kroll Bond Rating Agency.

The notes have a final maturity of November 2070, KBRA said, and the deal will repay investors on a combined pro rata and sequential basis.

Wells Fargo Securities, Goldman Sachs, ATLAS SP and Barclays Capital are among the initial note purchasers.

GCAT will also experience what’s known as subordination erosion. If cumulative loss or a delinquency trigger event is in effect, then the deal will distribute principal among the class A notes before any principal allocation the class M1 or class B certificates. So, the dollar amount of subordination credit support will fall for classes A1A, A1B and A2 during the life of the securitization, unless a trigger event occurs.

The deal will sell notes through about 11 tranches of classes A, M and B notes, KBRA said. GCAT 2025-NQM7 Trust will issue primarily fixed-rate notes, but the B1 notes could issue either fixed-rate notes or debt priced against a net weighted average coupon (WAC).

The A1A notes, rated AAA from KBRA, benefit from credit enhancement level representing 30.55% of the note balance, according to the rating agency. Tranches A1B and A1 also rated AAA, have credit enhancement representing 20.55% of the pool balance.

GCAT’s pool of assets, which has a cutoff date of November 1, is composed of 550 loans that have an average balance of $543,591, KBRA said. Of the loan pool, the aggregate top five balances represent 4.6% of the total pool, the rating agency said.

Borrowers—44.8% of which are self-employed—have a weighted average (WA) debt-to-income ratio of 35.9%, and non-zero WA annual income of $529,022.

Aside from the AAA-rated A1 notes, KBRA assigned AA- to the A2 notes; A- to the A3 notes; BBB- to the M1 notes; BB to the B1 notes; and B+ to the B2 notes, KBRA said.



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