CoreVest American Finance's fourth single family home securitization this year includes a pool of homes nearly double the average age of SFR deals over the past three years.
The $ 274.7 million transaction, CoreVest American Finance 2020-4, backed by 97 single-family, duplex and multi-family homes, includes a pool of 3,328 rental units in multiple markets on the East Coast and the Midwest with a weighted Average age of 60 years.
According to pre-sale reports from Fitch Ratings and the Kroll Bond Rating Agency, more than 62% of the pool balance is securitized by properties aged 50 and over.
"The properties in question are more than twice the average age of the properties in the 20 previous KBR-rated SFR transactions with a borrower that were issued since July 2017," said Kroll's report.
The units are located on 2,348 properties made up of single-family, two- to four-family, and multi-family properties – a collateral pool similar to CoreVest's earlier transactions and comprising a large number of properties backed by loans to smaller, non-institutional investors are.
While the average property value per unit is $ 127,554, the average loan size among the 97 loans is $ 2.9 million. All loans were made by CoreVest or other affiliates of parent company Redwood Trust.
House for rent
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The loans will support the sale of 10 CoreVest-sponsored bond classes, including a Class A tranche of US $ 176.52 million with preliminary AAA ratings from Fitch and Kroll. The bonds show a credit improvement of 35.75%.
According to the presale reports, all loans were current as of November 2020 and none of the borrowers had requested debt relief or forbearance due to COVID-19-related economic pressures. Around 69% of the pool balance is accounted for by newly taken out or refinanced CoreVest loans, which are structured with advance reserves for debt service employees – between three and six months of principal and interest payments.
The transaction is the 14th transaction for CoreVest since 2015, all of which have performed well with minimal losses, while only 79 out of 1,191 loans were used for specialized services. CoreVest has spent the majority of SFR secretizations with multiple borrowers during this time, compared to the single borrower institutional transactions which make up the majority of the SFR volume.
Multi-borrower securitisations pose greater challenges for issuers, Kroll said, because individual smaller borrowers that have been pooled do not have the financial resources, credit reporting and property management experience of larger institutional investors. According to Kroll, mom-and-pop investors still own over 99% of the $ 15 billion in the US single-family rental market.