Seasoned, FHA-insured home loans secure $302.9 million deal with Lakeview Trust

A pool of seasoned Federal Housing Authority-insured home loans will secure Lakeview Trust 2022-EB03 for $302.9 million, a deal slated for early June.

More than a thousand loans, or 1,713, make up the collateral pool, according to a pre-sale report by ratings agency Kroll Bond. Although the FHA insures mortgages, which is credit positive, home loans are delinquent and not likely to restore a repayment history, especially if they languish in the delinquency stage.

“Because the repeat resolution path is generally the most revenue-generating and fastest path to recovery, seasoned guarantees generate lower and slower estimated principal and interest recovery percentages,” KBRA said. None of the loans in the underlying pool were outstanding as of March 31, the pool deadline.

The success of the seasoned loan pool depends on the servicing agent’s expertise in managing HUD’s standard timeframes and procedures for filing claims, the KBRA notes. Lakeview also faces the potential risk of a repairer being terminated or replaced in an environment that makes it more likely that a successor repairer may charge higher fees.

Nomura Securities International and Performance Trust Capital Partners are the initial noteholders of the transaction, which will distribute interest to non-primary notes only before an acceleration event, according to KBRA.

The notes benefit from an interest reserve account, which is initially equivalent to about 12 months of the amount of interest due on classes A to B1, according to the KBRA.

Single-family homes represent a significant percentage, 69.8%, of the stock, followed by planned unit development, 17.9%. Condominiums, multi-family homes, manufactured homes and townhouses made up the rest, with each type of property accounting for less than 5% of the pool, according to the KBRA.

The balances, which range from $28,024 to $713,170, had current weighted average (WA) rates of 4.5% and remaining terms of 316 months. All properties are owner occupied.

The pool is highly diversified, with the top 10 loans accounting for 36.7% of the pool balance. The same applies geographically, as Chicago, Houston, New York, Dallas, and Washington, DC each made up less than 10% of the pool.

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