DBRS Morningstar Assigns Ratings to CSMC 2018-J1 Trust

DBRS, Inc. (DBRS Morningstar) assigned ratings to the following Mortgage-Backed Notes from the CSMC 2018-J1 Trust:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-6 at AAA (sf)
-- Class A-7 at AAA (sf)
-- Class A-8 at AAA (sf)
-- Class A-9 at AAA (sf)
-- Class A-10 at AAA (sf)
-- Class A-11 at AAA (sf)
-- Class A-12 at AAA (sf)
-- Class A-13 at AAA (sf)
-- Class A-14 at AAA (sf)
-- Class A-15 at AAA (sf)
-- Class A-16 at AAA (sf)
-- Class A-17 at AAA (sf)
-- Class A-18 at AAA (sf)
-- Class A-19 at AAA (sf)
-- Class A-20 at AAA (sf)
-- Class A-21 at AAA (sf)
-- Class A-22 at AAA (sf)
-- Class A-23 at AAA (sf)
-- Class A-24 at AAA (sf)
-- Class A-25 at AAA (sf)
-- Class A-26 at AAA (sf)
-- Class A-27 at AAA (sf)
-- Class A-28 at AAA (sf)
-- Class A-29 at AAA (sf)
-- Class A-X1 at AAA (sf)
-- Class A-X2 at AAA (sf)
-- Class A-X3 at AAA (sf)
-- Class A-X4 at AAA (sf)
-- Class A-X5 at AAA (sf)
-- Class B-1 at AA (high) (sf)

The above referenced securities are currently also rated by our affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these securities Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about [January 2, 2020]. In accordance with MCR’s engagement letter covering these securities, upon withdrawal of MCR’s outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. Information about the MCR ratings, including the history of the MCR ratings, can be found at https://ratingagency.morningstar.com/mcr.

This transaction is generally classified as a seasoned prime jumbo mortgage transaction.

DBRS Morningstar performed the following rating analysis for the transaction:
-- Loan-level default probability, loss severity, and expected loss review;
-- Cash flow analysis incorporating prepayment, loss timing, and interest rate assumptions, to evaluate the form and sufficiency of available credit enhancement;
-- Third-party due diligence sample size review;
-- Representations and warranties framework review; and
-- Historical performance analysis as reflected in delinquencies, cumulative losses, and constant prepayment rates.

POOL EXPECTED LOSSES
DBRS Morningstar used its proprietary RMBS Insight 1.3 model to derive probability of defaults, loss severities, and expected losses for the transaction. DBRS Morningstar recalculated or remapped certain collateral attributes in its analysis. Such recalculations and remapping for the transaction were applied in a consistent manner to how DBRS Morningstar would analyze similar RMBS transactions. The probability of defaults, loss severities, and expected losses for the transaction is stepped up from the raw model results.

CASH FLOW ANALYSIS
A structural analysis that encompassed 12 cash flow stress scenarios was performed, which focused on prepayment speeds, timing of losses, and interest rate stresses. For the transaction, the servicer will not advance any principal and interest payments on delinquent mortgages to the securitization trust. When performing cash flow analysis, DBRS approximated delinquency curves by front-loading its standard seasoned loss timing vectors by 24 months and assumed that the servicer will not advance for delinquent mortgages. This would result in P&I collections being shut off as soon as loans become delinquent until they are liquidated. Additionally, WAC deterioration stresses were incorporated in the runs.

OPERATIONAL RISK REVIEW
DBRS Morningstar did not perform originator reviews for the purpose of evaluating the mortgage pool in accordance with its RMBS rating methodology. DBRS Morningstar believes that the performance history of the seasoned loans is more indicative of credit risk than the dated origination and underwriting practices. Origination risks should have manifested in transaction performance over time and are therefore captured through the seasoned characteristics in the DBRS Morningstar RMBS Insight model.

THIRD-PARTY DUE DILIGENCE
DBRS Morningstar reviewed the sample size for each of the due diligence review categories, including credit, regulatory compliance, valuation, data integrity and pay histories. The sample sizes in the transaction meets DBRS Morningstar’s due diligence criteria. DBRS Morningstar did not review the loan-level due diligence findings for the transaction, rather it relied on the analysis done by MCR at the time of assigning ratings to the transaction on or prior to the closing date, as well as the satisfactory performance of the transaction to date.

REPRESENTATIONS AND WARRANTIES FRAMEWORK
DBRS Morningstar conducted a review of the representations and warranties (R&W) framework for the transaction. The review covers key considerations, such as R&W provider, controlling holder, enforcement mechanism, breach reviewer, remedy, and dispute resolution. DBRS Morningstar reviewed the various aspects of the R&W framework in conjunction with a detailed analysis of (1) the quality of the underlying mortgage loans and (2) third-party due diligence sample size and deemed the R&W standard for the transaction acceptable.

HISTORICAL PERFORMANCE
DBRS Morningstar reviewed historical performance for the transaction, as reflected in delinquencies, cumulative losses, and constant prepayment rates (CPR) and deems the performance for the transaction to be satisfactory.

OTHER REVIEWS
DBRS Morningstar notes that a legal analysis, which included but was not limited to legal opinions and various transaction documents, was performed by MCR as part of its process of assigning new ratings to the transaction on or prior to the closing date. For the purpose of assigning new ratings to the transaction, DBRS Morningstar did not perform additional document reviews unless otherwise indicated in this press release.

SUMMARY
The ratings are a result of DBRS Morningstar’s application of the “RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology” published in June 2019, unless otherwise indicated in this press release.

DBRS Morningstar’s ratings in the highest and second-highest rating categories 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 ratings assigned to the classes specified above are initiated by DBRS Morningstar as part of the recently announced analytical integration for certain overlapping U.S RMBS asset classes (see the August 30, 2019 press release, "DBRS and Morningstar Credit Ratings Confirm U.S. RMBS Asset Class Coverage"). As such, the ratings specified above are deemed to be solicited DBRS Morningstar ratings.

The ratings assigned to certain securities may differ from the ratings implied by the quantitative model, but no such difference constitutes a material deviation. When assigning the ratings, DBRS Morningstar takes into account the rating analysis detailed in this press release and may have made qualitative adjustments for the analytical considerations not fully captured by the quantitative model.

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.

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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