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.
Moneytips can help you refinance your existing home loan.