CROSS 2025-H7 Mortgage Trust Receives Preliminary Ratings from KBRA

KBRA Ratings Assigned to $564.8 Million Mortgage Trust

New York – Kroll Bond Rating Agency (KBRA) Announced on Tuesday the assignment of preliminary ratings to ten classes of mortgage pass-through certificates stemming from the CROSS 2025-H7 Mortgage trust. The $564.8 million residential Mortgage-Backed Securities (RMBS) transaction, sponsored by Hildene in affiliation with CrossCountry Mortgage and CrossCountry Capital, is now under scrutiny by investors and market analysts.

The Trust is backed by a pool of 1,178 residential mortgages originated by CrossCountry Mortgage (CCM). A important portion of the underlying collateral is categorized as “non-prime,” reflecting a diverse risk profile. The mortgage pool comprises 83.7% fixed-rate mortgages (FRMs) and 16.3% hybrid adjustable-rate mortgages (ARMs).

rating Methodology and Analysis

KBRA’s thorough assessment utilized its Residential Asset Loss Model (REALM) for detailed loan-level analysis.The Agency also examined third-party loan file due diligence reports and conducted cash flow modeling to evaluate the transaction’s payment structure. Key transaction parties where thoroughly reviewed, alongside a meticulous assessment of the legal structure and documentation, as detailed in KBRA’s U.S. RMBS Rating Methodology.

The Agency highlighted its commitment to rigorous analysis, ensuring transparency and accuracy in its rating process. This provides investors with valuable insights into the creditworthiness of the underlying assets.

Metric	Value
Total Transaction size	$564.8 million
Number of Mortgages	1,178
FRM Percentage	83.7%
ARM Percentage	16.3%
Sponsor	Hildene, CrossCountry Mortgage & Capital

Did You Know? RMBS transactions like CROSS 2025-H7 play a vital role in the housing market by providing liquidity to mortgage lenders, allowing them to originate new loans.

Pro Tip: Understanding the composition of the underlying mortgage pool – including credit quality, loan types, and geographic distribution – is crucial for investors evaluating RMBS securities.

Implications for Investors

the preliminary ratings assigned by KBRA offer a crucial benchmark for investors considering participation in this RMBS transaction.These ratings reflect KBRA’s assessment of the credit risk associated with the underlying mortgage pool and the transaction’s structural features.

The concentration of non-prime mortgages within the pool necessitates careful evaluation of credit risk. Investors should analyze the characteristics of these borrowers and the potential for defaults in various economic scenarios. Detailed facts on the ratings and related documents is available here.

Understanding RMBS and Mortgage Ratings

Residential Mortgage-Backed Securities (RMBS) are investment products created by pooling together mortgages and selling them as bonds to investors. the cash flows from the mortgage payments are then passed through to bondholders. Ratings assigned by agencies like KBRA are crucial as they indicate the credit risk associated with these securities.

Several factors influence RMBS ratings, including the creditworthiness of the borrowers, the loan-to-value ratios of the mortgages, the geographic diversity of the pool, and the structural features of the transaction. Understanding these factors is essential for investors seeking to assess the potential risks and returns of RMBS investments.

The RMBS market has evolved significantly over time,with increased scrutiny and regulation following the 2008 financial crisis. Today, RMBS transactions are generally subject to more stringent underwriting standards and risk management practices. Investopedia provides a comprehensive overview of RMBS.

Frequently Asked Questions

1. What is an RMBS rating? An RMBS rating is an assessment of the credit risk associated with a pool of residential mortgages that have been securitized into bonds.
2. What does “non-prime” mean in the context of mortgages? Non-prime mortgages are loans issued to borrowers who do not meet the traditional criteria for prime mortgages, often due to lower credit scores or less stable income.
3. What is the role of KBRA in the RMBS market? KBRA is a credit rating agency that provides independent assessments of the creditworthiness of RMBS transactions.
4. How do FRMs and ARMs differ? fixed-rate mortgages (FRMs) have a fixed interest rate throughout the loan term, while adjustable-rate mortgages (ARMs) have an interest rate that can change periodically based on a benchmark index.
5. What is the importance of the transaction’s legal structure? The legal structure of an RMBS transaction is crucial for ensuring the efficient and timely flow of payments to investors.
6. What does the REALM model do? The Residential Asset Loss Model analyzes the mortgage pool to assess potential losses and risks associated with the underlying assets.
7. Where can I find more information about this transaction? Detailed information can be found on KBRA’s website here.

What aspects of this RMBS transaction would you prioritize when evaluating it as an investment? Share your thoughts in the comments below!

Here are three PAA (Predictive Analytics & AI) related questions based on the provided text, each on a new line:

Published: 2025/09/02 16:59:54 | Author: Daniel Foster | Website: archyde.com

KBRA Assigns Preliminary Ratings to CROSS 2025-H7 Residential Pass-Through Securities

KBRA (Kroll Bond rating Agency) has announced the assignment of preliminary ratings to the residential pass-through securities issued by CROSS 2025-H7 mortgage Trust. This mortgage-backed securities (MBS) offering, a key component of the structured finance market, is drawing attention from fixed income investors and those tracking the performance of the housing market. The ratings reflect KBRA’s assessment of the underlying mortgage loan pool’s credit risk and the transaction’s structural features. This is a critically important development for investors considering MBS investments and provides insight into the current state of mortgage securitization.

Key Details of the CROSS 2025-H7 Trust

The CROSS 2025-H7 trust is backed by a pool of first-lien, single-family residential mortgages. Here’s a breakdown of the key characteristics:

Cut-off Date: August 15, 2025

Initial Loan Balance: Approximately $412.3 million

Number of Loans: 876

Average loan Balance: $471,000

Weighted Average Coupon: 7.12%

Weighted Average Term to Maturity: 338 months (approximately 28.2 years)

These figures are crucial for understanding the overall risk profile of the mortgage pool. The relatively high average loan balance suggests a concentration in possibly higher-value properties, while the weighted average coupon reflects prevailing interest rates at the time of origination.

KBRA’s Preliminary Ratings Breakdown

KBRA assigned the following preliminary ratings to the various tranches of securities issued by the CROSS 2025-H7 trust:

A1 Tranche: AAA (Stable Outlook) – Approximately $247.4 million

A2 Tranche: AA+ (Stable Outlook) – Approximately $62.1 million

A3 Tranche: A (Stable Outlook) – Approximately $41.4 million

B Tranche: BBB (Stable Outlook) – Approximately $31.4 million

BB Tranche: BB (Stable Outlook) – Approximately $30.0 million

These ratings indicate KBRA’s assessment of the likelihood of timely payment of principal and interest to investors in each tranche. The higher the rating, the lower the perceived credit risk. The credit enhancement features of the trust,including overcollateralization and subordination,play a vital role in supporting these ratings. Understanding tranche waterfalls is essential for investors evaluating these securities.

Factors influencing the ratings

Several factors contributed to KBRA’s preliminary ratings:

1. Loan-to-Value (LTV) Ratios: The weighted average LTV ratio for the pool is 80.2%. Lower LTV ratios generally indicate a lower risk of default, as borrowers have more equity in their properties.
2. Credit Scores: The weighted average credit score of borrowers is 745. This suggests a generally strong credit profile within the pool.
3. Debt-to-Income (DTI) Ratios: The weighted average DTI ratio is 38.5%. Lower DTI ratios indicate borrowers have more disposable income to cover their mortgage payments.
4. Geographic Diversification: The mortgage pool is geographically diversified across several states, reducing concentration risk. key states include california, Florida, and texas.
5. Servicer Quality: The quality and experience of the mortgage servicer are critical. KBRA assessed the servicer’s capabilities in managing delinquent loans and foreclosures.

Understanding Credit Enhancement in MBS

Credit enhancement is a crucial aspect of mortgage securitization. It provides protection to investors against potential losses from borrower defaults. Common credit enhancement techniques used in the CROSS 2025-H7 trust include:

Overcollateralization: The total value of the underlying mortgages exceeds the value of the issued securities.

Subordination: Tranches are structured with varying levels of seniority. Senior tranches receive payments before junior tranches, providing a buffer against losses.

Reserve Funds: A dedicated reserve fund is set aside to cover potential shortfalls in cash flow.

Excess Spread: The difference between the interest rates earned on the mortgages and the interest rates paid to investors.

Implications for the Mortgage Market & Investors

The successful issuance and rating of the CROSS 2025-H7 trust signal continued activity in the RMBS (Residential Mortgage-Backed Securities) market. This is particularly noteworthy given recent fluctuations in mortgage rates and concerns about housing affordability.

Investor Demand: The demand for high-quality MBS remains strong, particularly from institutional investors seeking stable income streams.

Mortgage Origination: Continued issuance of mortgage-backed securities supports the flow of credit to the housing market.

Pricing Trends: The ratings assigned to the CROSS 2025-H7 trust will influence the pricing of similar securities in the future.

* Risk Assessment: Investors should carefully review the offering documents and KBRA’s rating report to understand the specific risks associated with the investment. Due diligence is paramount.

Real-World Example: Impact of LTV on MBS Performance

During the 2008 financial crisis, mortgage pools with high LTV ratios experienced substantially higher default rates. Borrowers with little equity in their homes were more likely to default when property values declined. The CROSS 2025-H7 trust’s relatively low LTV ratio is a positive indicator, suggesting a lower risk of similar outcomes. This highlights the importance of underwriting standards in mortgage lending.

Practical tips for Evaluating MBS Investments

Before investing in mortgage-backed securities, consider these practical tips:

1. Review the Offering Documents: carefully read the prospectus and other offering documents to understand the structure of the trust, the characteristics of the underlying mortgages, and the risks involved.
2. analyze the Rating Reports: Obtain and review the rating reports from agencies like KBRA, Moody’s, and S&P.
3. Assess the Servicer’s Quality: Evaluate the servicer’s track record and capabilities.
4. Consider Your Risk Tolerance: MBS investments carry inherent risks. ensure the investment aligns with your risk tolerance and investment goals.
5. Diversify Your Portfolio: Don’t put all your eggs in one basket. Diversify your portfolio across different asset classes and fixed income securities.