Fitch Assigns Expected Ratings to COLT 2021-3.
ENPNewswire-September 1, 2021--Fitch Assigns Expected Ratings to COLT 2021-3
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Release date- 31082021 - Fitch Ratings expects to rate the residential mortgage-backed certificates to be issued by COLT 2021-3 Mortgage Loan Trust.
RATING ACTIONSENTITY/DEBT RATING
COLT 2021-3
A1
LT AAA(EXP)sf Expected Rating
A2
LT AA(EXP)sf Expected Rating
A3
LT A(EXP)sf Expected Rating
M1
LT BBB(EXP)sf Expected Rating
B1
LT BB(EXP)sf Expected Rating
B2
LT B(EXP)sf Expected Rating
B3
LT NR(EXP)sf Expected Rating
AIOS
LT NR(EXP)sf Expected Rating
X
LT NR(EXP)sf Expected Rating
VIEW ADDITIONAL RATING DETAILS
Transaction Summary
Loans in the pool were originated by multiple originators and aggregated by Hudson Advisors. All loans are currently or will be serviced by Select Portfolio Servicing, Inc. (SPS). The certificates are supported by 557 loans with a total balance of approximately $383 million as of the cutoff date.
KEY RATING DRIVERS
Non-QM Credit Quality (Mixed): The collateral consists of 557 loans, totaling $383 million and seasoned approximately one months in aggregate. The borrowers have a strong credit profile -- 743 model FICO and 38% debt-to-income ratio (DTI) (which includes mapping for debt service coverage ratio [DSCR] loans); and moderate leverage -- 81% sustainable loan-to-value ratio (sLTV). The pool consists of 74.3% of loans treated as owner occupied, while 25.7% were treated as an investor property (21.5%) or second home (4.2%). Additionally, 9.5% of the loans were originated through a retail channel, and 4.0% are designated as a qualified mortgage (QM) loan, while 74.5% are non-QM, and the remainder Ability to Repay Rule (ATR) does not apply. Lastly, there are currently four loans that are 30 days delinquent.
Loan Documentation (Negative): Approximately 84% of the pool was underwritten to less than full documentation, and 61% was underwritten to a 12- or 24-month bank statement program for verifying income, which is not consistent with Appendix Q standards and Fitch's view of a full documentation program. A key distinction between this pool and legacy Alt-A loans is that these loans adhere to underwriting and documentation standards required under the CFPB's ATR, which reduces the risk of borrower default arising from lack of affordability, misrepresentation or other operational quality risks due to rigor of the ATR's mandates regarding the underwriting and documentation of the borrower's ability to repay. Additionally, 17.0% is DSCR or no ratio product, 4.6% is an asset depletion product, and the remaining 1.6% is a mixture of other alternative documentation products. Separately, close to 4.5% of the loans were originated to foreign nationals or nonpermanent resident aliens or are unknown.
Modified Sequential Payment Structure (Mixed): The structure distributes principal pro rata among the senior certificates while shutting out the subordinate bonds from principal until all senior classes are reduced to zero. If a cumulative...
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