DBRS Morningstar Assigns Provisional Ratings to BRAVO Residential Funding Trust 2019-2

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Mortgage-Backed Notes, Series 2019-2 (the Notes) to be issued by BRAVO Residential Funding Trust 2019-2 (the Trust):

-- $184.5 million Class 1A1 at AAA (sf)
-- $32.6 million Class 1A2 at AAA (sf)
-- $217 million Class 1A3 at AAA (sf)
-- $217 million Class 1A-IO at AAA (sf)
-- $115 million Class 2A1 at AAA (sf)
-- $38.3 million Class 2A2 at AAA (sf)
-- $153.3 million Class 2A3 at AAA (sf)
-- $153.3 million Class 2A-IO at AAA (sf)
-- $299.4 million Class A1 at AAA (sf)
-- $70.9 million Class A2 at AAA (sf)
-- $370.3 million Class A3 at AAA (sf)
-- $370.3 million Class AIO at AAA (sf)
-- $11.7 million Class B1 at AA (sf)
-- $14.1 million Class B2 at A (sf)
-- $11.5 million Class B3 at BBB (sf)
-- $6.4 million Class B4 at BB (sf)
-- $5.5 million Class B5 at B (sf)

The AAA (sf) ratings on the Notes reflect 13.05% of credit enhancement provided by subordinated notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 10.30%, 7.00%, 4.30%, 2.80% and 1.50% of credit enhancement, respectively.

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

The Trust is a securitization of a portfolio of primarily seasoned performing first-lien fixed-rate residential mortgages funded by the issuance of the Notes. The Notes are backed by 7,026 loans with a total principal balance of $425,907,355 as of the Cut-Off Date (September 30, 2019).

The portfolio comprises 100% daily simple interest loans and has an average original loan size of $86,460. The loans are approximately 60 months seasoned. As of the Cut-Off Date, 99.3% of the pool is current, 0.7% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method and 0.4% is in bankruptcy (36 loans in bankruptcy are current while one is 30 days delinquent). Approximately 88.2% and 96.3% of the mortgage loans are both seasoned 24 months and 12 months, respectively, and have been zero times 30 days delinquent for the past 24 months and 12 months, respectively, under the MBA delinquency method.

The mortgage loans are divided into two collateral groups based on remaining terms to maturity. Group 1 (58.6% of the aggregate pool) consists of loans with remaining terms to maturity less than or equal to 14.5 years. Group 2 (41.4% of the aggregate pool) consists of loans with remaining terms to maturity greater than 14.5 years.

Of the portfolio, 0.1% of the loans are modified. The modifications happened more than two years ago for 56.7% of the modified loans. None of the loans within the pool have non-interest-bearing deferred amounts.

In accordance with the Consumer Financial Protection Bureau Ability-to-Repay (ATR) and Qualified Mortgage (QM) rules, 62.2% of the pool is designated as non-QM and the rest are not subject to the ATR/QM rules.

BRAVO III Residential Funding II Ltd. (the Depositor), a subsidiary of Loan Funding Structure LLC (the Sponsor), acquired the loans and will contribute them to the Trust. The Sponsor or one of its majority-owned affiliates will acquire and retain a 5% eligible vertical residual interest in the offered Notes, consisting of 5% of each class to satisfy the credit risk retention requirements. The originator of each loan in the pool is an affiliate of Capital One, National Association, which is not currently in the single-family home lending business.

The mortgage loans will be serviced by Rushmore Loan Management Services LLC. For this transaction, the aggregate servicing fee paid from the Trust will be 0.50%.

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.

Unlike other seasoned loan securitizations with no interest advancing mechanism, whereby a sequential-pay cash flow structure is typically used, this transaction employs a senior-subordinate shifting-interest structure. For transactions with no interest-advancing mechanism, there is generally a higher possibility of periodic interest shortfalls to the Noteholders as interest is not collected or advanced on any delinquent mortgages. To mitigate the potential interest shortfalls, this transaction employs a structural feature that uses both interest and principal collections to pay interest entitlements to the Noteholders.

The Group 1 and Group 2 senior Notes will be backed by collateral from each respective pool. The subordinate certificates will be cross-collateralized between the two pools. This is generally known as a Y-structure.

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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