Residential Investment Corp., a real estate investment trust (REIT) is sponsoring a $351.4 million residential mortgage-backed securities (RMBS) deal, which is backed by a pool of nonqualified mortgages (QMs) .

Morgan Stanley, Amherst Pierpont Securities, Credit Suisse Securities, Goldman Sachs and others will be early buyers in the transaction, called New Residential Mortgage Loan Trust, 2022-NQM2, or NRMLT 2022-NQM2.

The notes will be issued on a sequential payment structure, but the Class A tranche will not have priority over all other classes, according to Kroll Bond Rating Agency (KBRA). The NRMLT 2022-NQM2 payment provides a distribution cascade to all tickets at all times, including classes A-1 to A-3. In addition, the principal installment amount will be the first to pay any interest shortfall for Class A-1 and Class A-2 certificates before paying principal to those classes, sequentially, until they are fully reimbursed.

Credit enhancement includes excess margin. Each month, excess free cash flow up to the amount of cumulative realized losses and the current period will be used to redeem the largest outstanding classes of notes, on a sequential basis, KBRA said.

KBRA plans to assign “AAA” ratings to the $283.8 million Class A-1 notes, with a coupon of 2.9%. Other ratings range from “AA+” on the $18.6 million A-2 notes to “B-” on the $6.5 million Class B-2 notes.

The amounts paid will reduce or prevent write-downs that would otherwise have occurred on the more junior tickets. Using excess spreads in this way will preserve and restore subordination, as long as these funds are available.

A pool of 589 newly created mortgages will secure NRMLT 2022-NQM2, the rating agency said. Almost all mortgages, 99.3% are fixed rate mortgages, and the rest are adjustable rate. About 16.9% of the pool has an interest-only period. About 74.2% of the loans are non-QM, while the rest are classified as non-qualified mortgages, while the remaining loans are designated as exempt. They were created for commercial purposes. Borrower income documentation includes 12-month and 24-month bank statements, at a ratio of 37.4% and 48.1%, respectively.

The average loan balance, all of which are first liens, is $596,530.

Independent borrowers represent 69.4% of the mortgage balance. Overall, borrowers have a non-zero weighted average median annual income of $256,146.

The deal is expected to close on March 4.