Rithm Capital closed a $500.0 million MBS backed by rated residential transition loans through its Genesis Capital shelf. The deal is the second RTL securitization to receive a rating from Morningstar DBRS.

A challenging market for fix-and-flip homes has led more investors to seek financing on their projects.

The deal received a preliminary A rating from Morningstar.

Ratings for MBS with residential transition loans are helping to increase investor demand.

Insurance companies and European investors have shown a growing interest in MBS backed by expanded-credit mortgages. However, there is not enough supply to meet demand.

Morningstar DBRS assigned a preliminary A rating to the deal that includes 370 short-term loans with a principal balance of $158.4 million.

Fix-and-Flip lender Kiavi says it has already seen a boost in its pipeline in the first six weeks of the year.

Expanded-credit securitization is heating up and prime non-agency MBS issuers are also active.

Falling interest rates are fueling optimism over growth in the fix-and-flip lending space this year, but competition from new homebuilders may dampen market expectations.

Activity in the sector is expected to pick in the coming months as DBRS is close to establishing criteria to rate securitizations of residential transition loans.