RWT Holdings is preparing to sponsor a sale of $341.6 million in residential mortgage-backed securities (RMBS), backed by a pool of prime mortgages that are primarily seasoned.
Sequoia Mortgage Trust, 2026-S1, deal will sell the notes through a series that includes initial exchangeable notes, according to analysts at Fitch Ratings and Kroll Bond Rating Agency.
Sequoia’s collateral pool is composed of 699 seasoned, prime residential mortgages, the rating agencies said. The pool is slightly larger, compared with 671 loans in the SEMT 2025-S2, but has a noticeably lower average loan balance, according to KBRA.
That seems to track with the significantly lower median income, $138,098, compared with the $245,474 median income on the previous deal, KBRA said.
The ‘AAA’ rated super senior notes, classes A1 through A18 are expected to pay coupons ranging from 2.00% through $3.00%, and all benefit from credit enhancement levels of 15.00%, KBRA said.
SEMT 2026-S1 is expected to close on October 23, with BofA
Securities as the sole bookrunner, according to KBRA. Stifel, Nicholas joins BofA as the deal’s initial purchaser, the rating agency said, adding that the notes are expected to reach final maturity at September 2056.
Fitch analysts say SEMT 2026-S1 has a final default probability (PD) of 9.49% the ‘AAA’ stress level, with an expected final loss of 34.25% on the same rating stress.
That the vast majority of loans are seasoned (92.5%) and prime works in the deal’s favor, Fitch said. The deal acquired the loans from Huntington Bank, and various originators contributed the remaining 7.1% of underlying mortgages, which are newly origination.
Rocket Mortgage is the master servicer on the deal, Fitch said.
SEMT 2026-S1 will repay noteholders through a senior-subordinate, shifting interest structure, in which subordinate classes receive only scheduled principal and are locked out from unscheduled principal or prepayment.
After the lockout period ends, unscheduled principal will be distributed to certificate holders, gradually shifting to a pro rata allocation schedule among the related senior and subordinate classes.
Outside of the super senior tranches, KBRA assigns ratings AAA to the A-19 through A-25 notes, KBRA said. KBRA assigns AA- to the B1 notes; A- to the B2 notes; and BBB-, BB- and B- to the B3, B4 and B5 notes, respectively.
Fitch’s ratings range from AAA to B- on the A9 through B5 notes.
