COLT 2022-6 Mortgage Loan Trust is preparing to issue $423.3 million in mortgage-backed securities (MBS), or certificates, in a deal secured by a pool of 1,017 nonprime loans.

The transaction will have to overcome several potentially negative credit drivers, according to Fitch Ratings. For one, home price values in the current pool are 9.7% below a long-term sustainable level. Overall, underlying fundamentals are not keeping pace with the growth in home prices, which could exacerbate the supply-demand balance already in place because of low inventory.

The loans in the collateral pool are considered non-qualified, though the borrowers start off with a moderate credit profile, indicated by a 739 model FICO score. Borrowers have a model debt-to-income of 46.5%, and a sustainable loan-to-value ratio of 78.0%, and a combined LTV of 71.9%,k according to Fitch Ratings.

The loans have been seasoned for about five months in aggregate, the rating agency said.

About 79% of the loans in the collateral pool were made to borrowers without full documentation. Some 34% of the loans in the pool were underwritten to bank statements to verify income.

Goldman Sachs is the lead underwriter on the COLT 2022-6 Mortgage Loan Trust, for which Select Portfolio Servicing will act as servicer on the notes, the rating agency said. Notes will be issued from a senior-subordinate capital structure, and Fitch expects to assign ratings of ‘AAA’ on the $298.6 million, on the A1 class to ‘B’ on the $18.4 million, B3 notes, the rating agency said.

None of the notes have exposure to the LIBOR benchmark;  interest rates are expected to be 4.65% on the senior notes, and 4.69% on the subordinate notes.

The notes have a final maturity of June 2067.

Just 44.5% of the mortgaged homes in the pool would serve as the borrower’s primary residence, while investor properties account for 49.9% of the pool.