The non-bank lender received the preliminary ratings for its A1-a, A1-R and A2 classes of RMBS to be issued by Permanent Custodians as a trustee of Pepper Residential Securities Trust No. 15 – a securitisation of nonconforming residential mortgages originated by Pepper.
The credit agency said its ratings reflect its view of the underlying collateral portfolio, including the fact that it is a closed portfolio, which means that no further loans will be assigned to the trust after the closing date.
S&P also said that the credit support is sufficient to withstand the stresses applied by the agency.
“This credit support comprises note subordination of each class of rated note,” it said.
S&P noted that the extraordinary expense reserve of $150,000 funded by Pepper at closing will be available to meet extraordinary expenses, with the reserve to be topped up via excess spread of drawn.
The credit ratings agency said it expects that the various mechanisms to support liquidity within the transaction "are sufficient under our stress assumptions to ensure timely payment of interest".