DBRS Morningstar Finalizes Provisional Ratings on CIM Trust 2019-R2

DBRS, Inc. (DBRS Morningstar) finalized the following provisional ratings on the Mortgage-Backed Notes, Series 2019-R2 (the Notes) issued by CIM Trust 2019-R2 (the Trust):

-- $283.1 million Class A1 at AAA (sf)
-- $240.6 million Class A1-A at AAA (sf)
-- $42.5 million Class A1-B at AAA (sf)
-- $283.1 million Class A1-IO at AAA (sf)
-- $26.0 million Class M1 at AA (sf)
-- $26.0 million Class M1-IO at AA (sf)

Classes A1-IO and M1-IO are interest-only notes. The class balances represent notional amounts.

Classes A1, A1-A and A1-B are exchangeable notes. These classes can be exchanged for combinations of exchange notes as specified in the offering documents.

The AAA (sf) rating on the Class A-1 Notes reflects 38.95% of credit enhancement provided by subordinated Notes in the pool. The AA (sf) rating reflects 33.35% of credit enhancement.

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 seasoned performing and re-performing first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 3,406 loans with a total principal balance of $464,327,419 as of the Cut-Off Date (August 31, 2019).

The loans are approximately 152 months seasoned. As of the Cut-Off Date, 95.6% of the pool is current, 1.9% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method and 2.4% is in bankruptcy. Approximately 43.4% and 97.5% of the mortgage loans have been zero times 30 days delinquent for the past 24 months and 12 months, respectively, under the MBA delinquency method.

Of the portfolio, 87.0% of the loans are modified. The modifications happened more than two years ago for 83.4% of the modified loans. Within the pool, 1,704 mortgages have non-interest-bearing deferred amounts, which equates to 10.6% of the total principal balance. Included in the deferred amounts are proprietary principal forgiveness and Home Affordable Modification Program principal reduction alternative (PRA) amounts (collectively, the PRA amounts), which comprise approximately 0.1% of the total principal balance. Unless specified otherwise, all statistics for the mortgage loans in the related presale report are based on the current balance, including the applicable non-interest-bearing deferred and PRA amounts.

In accordance with the Consumer Financial Protection Bureau’s Ability-to-Repay (ATR) and Qualified Mortgage (QM) rules, 3.1% of the pool is designated as QM Safe Harbor and the rest are not subject to the ATR/QM rules.

Fifth Avenue Trust (the Seller) acquired the loans on August 29, 2019, and, through a wholly owned subsidiary, Funding Depositor LLC (the Depositor), will contribute loans to the Trust. As the Sponsor, Chimera Investment Corporation (Chimera) or one of its majority-owned affiliates will acquire and retain a 5% eligible horizontal residual interest in the Notes, consisting of the Class B3 and C Notes in aggregate, to satisfy the credit risk retention requirements. The 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 Rushmore Loan Management Services LLC.

Prior to this transaction, Chimera had issued 25 securitizations under the CIM shelf since 2014, backed by seasoned, subprime, re-performing or non-performing loans. DBRS Morningstar only rated one of the previously issued CIM deals, CIM Trust 2017-7. DBRS Morningstar reviewed the historical performance of both the rated and unrated transactions issued under the CIM shelf, particularly with respect to the re-performing transactions, which may or may not have collateral attributes similar to CIM Trust 2019-R2. The re-performing CIM transactions generally have delinquencies and losses in line with expectations for previously distressed assets.

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 and principal proceeds will be used to cover interest shortfalls on the Class A1, A1-IO, M1 and M1-IO Notes.

The DBRS ratings of AAA (sf) and AA (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 rating 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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