Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction.
The
This securitization is a portfolio of fixed- and adjustable-rate, expanded prime and nonprime, first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 1,664 mortgage loans with a total principal balance of
The mortgage pool consists primarily of loans from the following five collapsed previously issued
The loans are on average more seasoned than a typical new origination non-Qualified Mortgage (non-QM) securitization. The DBRS Morningstar calculated weighted-average (WA) loan age is 34 months, and 99.1% of the loans are seasoned 24 months or more. Within the pool, 96.6% of the loans are current, 2.5% are 30 days delinquent, and 0.9% are 60 days or more delinquent. All but two loans that are 60 days or more delinquent are part of an active forbearance or deferral plan. The Coronavirus Disease (COVID-19)-affected loans account for 32.5% of the pool and are described in further detail below.
The originators for the mortgage pool are Sprout Mortgage (29.5%) and other originators, each comprising less than 10.0% of the mortgage loans. The Servicers of the loans are Shellpoint Mortgage Servicing (79.4%) and
Although the mortgage loans were originated to satisfy the
The sponsor, directly or indirectly through a majority-owned affiliate, will retain an eligible vertical residual interest consisting of not less than 5% of each Note, to satisfy the credit risk-retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder.
On or after the earlier of (1) the Distribution Date occurring in
If the Sponsor (or an affiliate) is not the Controlling Holder and there is more than one Class XS Noteholder, a Third-Party Auction may be requested. The Third Party Auction Bid must equal or exceed the Optional Redemption Price for the qualified liquidation to take place.
This transaction incorporates a sequential-pay cash flow structure with a pro rata feature among the senior tranches. Principal proceeds can be used to cover interest shortfalls on the Class A-1 and A-2 Notes sequentially after a Trigger Event. For more subordinated Notes, principal proceeds can be used to cover interest shortfalls as the more senior Notes are paid in full. Furthermore, excess spread can be used to cover realized losses and prior period bond writedown amounts first before being allocated to unpaid cap carryover amounts to Class A-1 down to Class B-3.
CORONAVIRUS IMPACT
The coronavirus pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to rise in the coming months for many residential mortgage-backed securities (RMBS) asset classes, some meaningfully.
The non-QM sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans that may fall outside of the
As a result of the coronavirus pandemic, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans.
In connection with the economic stress assumed under its moderate scenario (see 'Global Macroeconomic Scenarios: December Update,' published on
In the non-QM asset class, while the full effect of the coronavirus pandemic may not occur until a few performance cycles later, DBRS Morningstar generally believes loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher loan-to-value ratio (LTV) borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy.
In addition, for this transaction, as permitted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on
For these loans, DBRS Morningstar applied additional assumptions to evaluate the impact of potential cash flow disruptions on the rated tranches, stemming from (1) lower P&I collections and (2) limited servicing advances on delinquent P&I. These assumptions include the following:
Increasing delinquencies on the
Increasing delinquencies on the A (sf) and below rating levels for the first nine months.
No voluntary prepayments for the first 12 months for the
No liquidation recovery for the first 12 months for the
For more information regarding rating methodologies and the coronavirus, please see the following DBRS Morningstar press releases and commentary: 'DBRS Morningstar Provides Update on Rating Methodologies in Light Of Measures to Contain Coronavirus Disease (COVID-19),' dated
The ratings reflect transactional strengths that include the following:
Robust loan attributes and pool composition.
Satisfactory third-party due-diligence review.
Improved underwriting standards.
The transaction also includes the following challenges:
Borrowers on forbearance plans.
Three-month advances of delinquent P&I.
The representations and warranties framework.
Nonprime, non-QM, and investor loans.
The P&I advance party's financial capability.
No Operational Risk Review on National Mortgage Service
The full description of the strengths, challenges, and mitigating factors is detailed in the related presale report.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
Notes:
All figures are in
The principal methodology is RMBS Insight 1.3:
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.
The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
Tel. +1 212 806-3277
Ratings
Date Issued Debt Rated Action Rating Trend Attributes
i
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
12-Jan-21 Mortgage-Backed Notes, Series 2021-R1, Class A-1 Provis.-NewAAA (sf) -- US
12-Jan-21 Mortgage-Backed Notes, Series 2021-R1, Class A-2 Provis.-New AA (sf) -- US
12-Jan-21 Mortgage-Backed Notes, Series 2021-R1, Class A-3 Provis.-New A (low) (sf) -- US
12-Jan-21 Mortgage-Backed Notes, Series 2021-R1, Class M-1 Provis.-New BBB (low) (sf) -- US
12-Jan-21 Mortgage-Backed Notes, Series 2021-R1, Class B-1 Provis.-New BB (low) (sf) -- US
12-Jan-21 Mortgage-Backed Notes, Series 2021-R1, Class B-2 Provis.-New B (low) (sf) -- US
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