DBRS Morningstar Assigns Provisional Ratings to Mill City Mortgage Loan Trust 2019-GS1

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Mortgage-Backed Securities, Series 2019-GS1 (the Notes) to be issued by Mill City Mortgage Loan Trust 2019-GS1 (the Trust):

-- $49.8 million Class A1A at AAA (sf)
-- $17.2 million Class A1B1 at AAA (sf)
-- $132.1 million Class A1B2 at AAA (sf)
-- $199.1 million Class A1 at AAA (sf)

Class A1 is an exchangeable note. This classes can be exchanged for combinations of exchange notes as specified in the offering documents.

The AAA (sf) ratings reflect 45.75% of credit enhancement provided by subordinated Notes in the pool.

Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction.

This transaction is a securitization of a portfolio of primarily first-lien, seasoned, performing and re-performing residential mortgages funded by the issuance of the Notes. The Notes are backed by 2,356 loans with a total principal balance of approximately $386,295,284 as of the Cut-Off Date (August 31, 2019).

The loans are approximately 141 months seasoned. As of the Cut-Off Date, 83.7% of the pool is current, 8.5% is 30 days to 59 days delinquent, 2.5% is 60 days to 89 days delinquent, 1.8% is 90+ days delinquent under the Mortgage Bankers Association (MBA) delinquency method and 3.5% of the pool is in bankruptcy. Approximately 33.2% of the pool has been zero times 30 (0 x 30) days delinquent for the past 24 months, 56.0% has been 0 x 30 for the past 12 months and 70.9% has been 0 x 30 for the past six months. Approximately 4.0% of loans were missing data in certain months and as such are not included when determining 0 x 30 days delinquent.

Modified loans comprise 78.6% of the portfolio. The modifications happened more than two years ago for 79.3% of the
modified loans. Within the pool, 946 loans have non-interest-bearing deferred amounts, which equates to 11.8% of the total principal balance.

In accordance with the Consumer Financial Protection Bureau Qualified Mortgage (QM) rules, 3.5% of the loans are designated as QM Safe Harbor, 0.1% as QM Rebuttable Presumption and 2.7% as non-QM. Approximately 93.7% of the loans are not subject to the QM rules.

Approximately 13.7% of the pool comprises non-first-lien loans.

Goldman Sachs Mortgage Company (GSMC) is the Sponsor and is acquiring (most of) the loans from various Mill City entities in connection with the securitization. A small percentage of the loans are being acquired by GS into MTGLQ Investors L.P. to be contributed into the transaction. As the Sponsor, GSMC, directly or through a majority-owned affiliate, will acquire and retain a 5.0% uncertificated eligible vertical interest in the transaction to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder. These loans were originated and previously serviced by various entities through purchases in the secondary market.

As of the Cut-Off Date, the loans are serviced by NewRez d/b/a Shellpoint Mortgage Servicing (SMS, 73.9%) and Fay Servicing, LLC (Fay, 26.1%).

There will not be any advancing of delinquent principal or interest on any mortgages by the servicer or any other party to the transaction; however, the servicer is obligated to make advances in respect of homeowner association fees, taxes and insurance as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.

On or after the Payment Date, when the aggregate note amount of the offered Notes is reduced to 10% of the Closing Date note amount, the Call Option Holder (the Depositor or any successor or assignee) has the option to purchase all of the mortgage loans and any real estate-owned (REO) properties at a purchase price equal to the unpaid principal balance of the mortgage loans, plus the fair market value of the REO properties and any unpaid expenses and reimbursement amounts.

The transaction employs a sequential-pay cash flow structure. Principal proceeds can be used to cover interest shortfalls on the Notes, but such shortfalls on Class M2 and more subordinate bonds will not be paid until the more senior classes are retired.

The DBRS ratings of AAA (sf) address the timely payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the related Notes.

The full description of the strengths, challenges and mitigating factors is detailed in the related report.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, which can be found on dbrs.com under Methodologies & Criteria.

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@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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