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10/06/2025 – 04:13 PM
NEW YORK – Kroll Bond Rating Agency (KBRA) has issued preliminary ratings for eight classes of mortgage-backed notes stemming from New Residential Mortgage Loan Trust 2025-NQM5 (NRMLT 2025-NQM5). The $500.9 million transaction is a non-prime residential mortgage-backed securities (RMBS) deal sponsored by Rithm Capital Corp. (NYSE: RITM), a publicly traded real estate investment trust (REIT). This move comes as the non-prime mortgage market continues to attract investor attention, seeking higher yields in a complex economic environment.
The underlying mortgage pool for NRMLT 2025-NQM5 primarily originates from Champions Funding, LLC (31.9%), NewRez LLC (24.8%), and Home Express Mortgage Corp. (15.3%). Crucially, all loans will be serviced by Shellpoint Mortgage Servicing, a brand operating under NewRez LLC, potentially streamlining servicing and loss mitigation efforts. This consolidation of servicing within a single entity could lead to greater efficiency and consistency in loan management.
The RMBS is collateralized by 987 residential mortgages. Borrowers within the NRMLT 2025-NQM5 pool exhibit a weighted average original credit score of 741, with a weighted average original loan-to-value (LTV) ratio of 74.2% and a combined LTV (CLTV) of 74.2%. These metrics suggest a borrower profile with reasonable creditworthiness and moderate leverage. The loans are approximately three months seasoned and are comprised entirely of fixed-rate mortgages (FRMs). Approximately 8.3% of the pool features an initial interest-only period, a detail that could affect the cash flow dynamics of the security, particularly in its early years.
KBRA’s rating approach involved a granular loan-level analysis of the mortgage pool, employing its Residential Asset Loss Model (REALM). This model simulates potential losses under various stress scenarios. Furthermore, KBRA conducted an examination of the results derived from third-party loan file due diligence, cash flow modeling analysis of the transaction’s payment structure, extensive reviews of key transaction parties, and a thorough assessment of the transaction’s legal structure and documentation. This multi-faceted approach is consistent with KBRA’s rigorous methodology for rating U.S. RMBS transactions.
The ratings reflect KBRA’s assessment of the credit risk associated with the underlying mortgage pool and the structural features of the transaction. Potential investors should carefully review the pre-sale report and underlying documentation to fully understand the risks involved, including those related to borrower default, servicing performance, and macroeconomic factors. While the relatively high credit scores and fixed-rate nature of the mortgages offer some stability, the non-prime nature of the loans inherently introduces additional credit risk compared to prime RMBS transactions. The performance of NRMLT 2025-NQM5 will serve as a barometer for the broader non-prime mortgage market, offering insights into the credit quality and resilience of this sector.
KBRA’s analysis is further described in its U.S. RMBS Rating Methodology.
Source: Kroll Bond Rating Agency, LLC
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