The New AAA-Rated Mortgage Bond

New mortgage bond with pre-2008 subprime or Alt-A mortgages have made some wary

The New AAA-Rated Mortgage Bond
March 30, 2016

One of the driving factors behind the 2008 housing market crash was that many lenders were giving mortgage loans to those who had poor credit, little income, and a history of making poor financial decisions. The new AAA-rated mortgage bond that will be available soon includes both Alt-A and subprime mortgages, and for many, this appears to be turning the clock back to the time shortly before the crisis. Fortunately, only about a quarter of the loans in this mortgage bond deal have been modified. These loans were modified previously, but all of them are now current.

These loans are part of a securitization deal being done by New Residential. The company’s New Residential Mortgage Loan Trust 2016-1 securitized seasoned first-lien mortgages worth a total of $261.2 million dollars. The strong performance of these loans coupled with the fact that the loan pool has a combined 12 years’ worth of seasoning makes their originators somewhat irrelevant, although many have origination dates that are more than ten years old. Many, in fact, come from the 2005 securitization done by Merrill Lynch Mortgage Investors.

Moody’s Investors Service, which handled most of the deal, notes that the bond received its AAA rated due to several factors. One was the default rate for Alt-A, subprime, and prime mortgages over the past five years. Another was based not on the originator, as is common, but on the performance of the previous securitizations.

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Steffanie | 03.30.16 @ 20:03
Hope that crash never happens again. Glad to see they have implemented something new.
Carla Truett | 03.30.16 @ 20:05
I hope this doesn't lead to another crash. I'm sure this company has done its homework. Our economy is still a bit rocky but I hope this works for these lenders and borrowers.
Christina | 03.30.16 @ 20:12
Hope they have a good plan if it happens again. Don't think it would be good to go through another crash.
Erin | 03.30.16 @ 20:13
Yikes, I hope this is not steering is toward another crash. I will be keeping an eye on this one. Thanks for the information.
Nancy | 03.30.16 @ 20:14
This sounds well thought out. Whatever we need to avoid another crash.
Heather | 03.30.16 @ 20:16
I know the government has new safe guards so that predatory lending doesn't happen again. But I wouldn't hold my breath. When it comes to big money these companies will find a way around it.
Tina | 03.30.16 @ 20:19
We are still feeling the impact of that crash. I sure hope they've thought this through before introducing this. It could be a great thing if it works out.
Jo Ann | 03.30.16 @ 20:20
Very confusing information for lay people. Sub prime mortgages should be outlawed, not given triple A ratings. I hope the future for these loans is a long and slow process, so we don't wind up in another recession.
Elaine | 03.30.16 @ 20:20
Truly hope the crash doesn't happen again but I could see it bc people just don't care about their credit it seems.
George Middleton | 03.30.16 @ 20:24
Hope they know how to handle it better if it crashes again. So good information to read.
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