RATING DRIVERS
Supporting Factors
- High credit quality of securitised loans in mortgage pool
- Good underwriting practices of TTMF, the originator of the mortgages within the pool
- Simple transaction structure, with effective credit enhancement built in
- Legal and regulatory framework supporting the transaction provides adequate protection to investors
Constraining Factor
- Mortgage pool seasoning along with a challenging economic environment could increase default risk
Rating Sensitivity Factors
Factors that could, individually, or collectively, lead to an improvement of the ratings and/or Outlook include:
- An improvement in the credit rating of the sovereign over the next 12-15 months
Factors that could, individually, or collectively, lead to a lowering of the ratings and/or Outlook include:
- Impairments (delinquencies above 7.5% or NPLs above 5%) in the underlying mortgage pool leading to heightened extension and/ or default risk
- Significant mortgage prepayments leading to a material reduction in excess spreads available to cover losses
BACKGROUND
CMO 2022-01 is a structured finance debt instrument being created by the Home Mortgage Bank (HMB or The Bank). The product was created to securitise residential mortgage assets purchased from the Trinidad Tobago Mortgage Finance Company Limited (TTMF) on the secondary mortgage market. CMO 2022-01 will offer participation certificates in 4 tranches in the amount of TT $100 million as follows:
- Series A – TT $30.0 million with an average life of 0.96 years at an initial coupon rate of 3.00%
- Series B – TT $20.0 million with an average life of 2.85 years at an initial coupon rate of 3.30%
- Series C – TT $10.0 million with an average life of 4.25 years at an initial coupon rate of 4.00%
- Series D – TT $40.0 million with an average life of 7.5 years at an initial coupon rate of 5.00%
The collateralised mortgages will be held in Trust by TTMF and governed by the laws of the Republic of Trinidad & Tobago and established by a Declaration of Trust. The investment security will have monthly coupon payments that are payable to all certificate holders. Certificates are structured to enable investors to participate in the acquisition and ownership of a pool of residential mortgages. Each Certificate will represent an undivided beneficial ownership interest in the Mortgage Pool. The principal amounts of each tranche available for distribution (Series A to D) will be repaid sequentially from all scheduled and unscheduled (prepayments, lumpsum payments and payoffs) payments. The final principal payment is expected to coincide with the maturity of each respective tranche. Thus, Series A will be fully repaid before principal repayment starts on Series B and so on. The Bank will also issue 3 additional Series; T1, T2 and R that will not be available for distribution[1].
Analytical Contacts:
Khadine Tavares
Tel: 1-876-616-9813
E-mail: [email protected]
Keith Hamlet
Tel: 1-868-627-8879 Ext. 244
E-mail: [email protected]
Website: www.caricris.com
E-mail: [email protected]
Disclaimer: CariCRIS has taken due care and caution in compilation of data for this product. Information has been obtained by CariCRIS from sources which it considers reliable. However, CariCRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. No part of this report may be published / reproduced in any form without CariCRIS’ prior written approval. CariCRIS is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this product.