Rating agency, Moody's Investor Services, has assigned a provisional rating to the 24 classes of Wells Fargo's first residential mortgage-backed securities (RMBS). The bank has reentered the RMBS market after a decade with the Wells Fargo Mortgage Backed Securities 2018-1 Trust ("WFMBS 2018-1").
The WFMBS 2018-1 transaction consists of the securitization of 660 primarily 30-year, fixed rate, prime residential mortgage loans with an unpaid principal balance of approximately $441 million, Moody's indicated.
Giving the securitizations a rating range from (P)Aaa (sf) to (P)Ba1 (sf), Moody's said, "The pool has strong credit quality and consists of borrowers with high FICO scores, significant equity in their properties and liquid cash reserves. The pool has clean pay history and is seasoned for almost 18 months."
According to Moody's the mortgage loans for this transaction are originated by Wells Fargo Bank in accordance with the non-conforming underwriting guidelines. All of the loans are designated as qualified mortgages (QM) under the QM safe harbor rules, the rating agency said.
Speaking to DS News, a spokesperson for Wells Fargo had recently said that the offering would include recently originated non-conforming, prime loans that were "consistent with those we have been putting on our balance sheet for the past several years."
The rating also gave insights into how Wells Fargo planned to service the loans. It indicated that the bank would be the master servicer for this transaction.
Wells Fargo will service all the loans and will also be the master servicer for the transaction. who will be primarily responsible for funding certain services advances and delinquent scheduled interest and principal payments for the mortgage loans, unless they determined that such amounts would not be recoverable.
"In the event a servicer event of default has occurred and the Trustee terminates the servicer as a result thereof, the master servicer shall fund any advances that would otherwise be required to be made by the terminated servicer (to the extent the terminated Servicer has failed to fund such advances until such time as a successor servicer is appointed and commences servicing the mortgage loans," Moody's said. "The master servicer and servicer will be entitled to be reimbursed for any such monthly advances from future payments and collections (including insurance and liquidation proceeds) with respect to those mortgage loans."
The bank couldn’t have picked a better time to enter this market with the issuance of private-label RMBS hitting a post-crisis high of $75 billion in 2018, according to a recent Bloomberg report, due to heavy investor demand for non-qualified mortgage transactions
Wells Fargo had been one of the top RMBS lenders before the crisis with more than $1 trillion worth of mortgages sold in 2005 and 2006, the Bloomberg report said.