DBRS Morningstar Assigns Provisional Ratings to GoodGreen Trust 2020-1

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following notes to be issued by GoodGreen Trust 2020-1 (the Issuer):

-- $274,261,000 Class A rated AAA (sf)
-- $8,483,000 Class B rated AA (sf)
-- $35,342,000 Class C rated BBB (sf)

The ratings are based on DBRS Morningstar’s review of the following considerations:

-- The transaction’s analytical inputs consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: June Update,” published on June 1, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020. The scenarios were updated on June 1, 2020, and are reflected in DBRS Morningstar’s rating analysis.
-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary (the moderate scenario serving as the primary anchor for current ratings). The moderate scenario assumes some success in containment of the coronavirus within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020.
-- To account for the potential additional borrower stress, DBRS Morningstar applied adjustments consistent with the moderate scenario in its analysis of the asset portfolio’s probability of delinquency.
-- Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement in the form of a subordinated note, interest reserve, and excess spread.
-- Credit enhancement levels sufficient to support the DBRS Morningstar-expected delinquency and loss severity assumptions under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For the transaction, the ratings address the timely payment of interest on a semiannual basis and the payment of principal by the Scheduled Maturity.
-- The capabilities of Ygrene Energy Fund Inc. (Ygrene or the Company) with regard to originations and underwriting.
-- DBRS Morningstar performed an operational review of Ygrene and considers the Company to be an acceptable originator of property assessed clean energy (PACE) assessments.
-- The legal structure and presence of legal opinions that address the true sale of the assets to GoodGreen Funding 2020-1 LLC (the Depositor), the nonconsolidation of the Depositor with Ygrene, that the Issuer has a valid first-priority security interest in the PACE Asset Portfolio, and the consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”
-- Review of legal considerations specific to PACE.
-- Each of the Golden State Finance Authority and the County of Yolo had validation judgments issued by the California Superior Court that confirm that the PACE special tax liens and PACE Special Taxes are valid and enforceable obligations that conform to all federal and state laws. In addition, the judgments ruled that the PACE Assessments do not constitute a taking of private property without due process of law in violation of the fifth and 14th Amendments to the U.S. Constitution or the California Constitution (see the Validation section in the related presale report).
-- Green Corridor had a validation judgment issued by the Circuit Court of the Second Judicial Circuit in and for Leon County, Florida, confirming that the PACE Assessments are valid and enforceable obligations that conform to all federal and state laws. The judgment also ruled that the PACE Assessments do not constitute a taking of private property without due process of law in violation of the fifth and 14th Amendments to the U.S. Constitution or the Florida Constitution (see the Validation section in the related presale report).
-- Missouri law does not require a judicial validation proceeding to be brought to validate PACE programs in the state. The Missouri PACE legislation contains another provision, known as a the statute of repose, which requires challenges to PACE programs to be brought within a limited period of time. Similar to a validation proceeding, the effect of the statute of repose is to bar challenges from any person after the specified time period has elapsed. DBRS Morningstar has been advised that the statute of repose has expired with respect to the Missouri Clean Energy District PACE program, and no claims have been raised (see the Validation section in the related presale report).
-- The Federal Housing Finance Agency (FHFA) has voiced concerns that residential PACE Assessments have a lien status superior to that of existing mortgages underwritten by Fannie Mae and Freddie Mac. DBRS Morningstar has reviewed the FHFA’s statements on the subject and notes that such statements do not challenge the validity of the PACE Assessment as a valid lien.
-- Servicing is performed by local county tax collection offices.
-- Commingling risks associated with the servicing of PACE Assessments by local county tax collection offices are mitigated by the protections afforded to special revenue collections under Chapter 9 of the U.S. Bankruptcy Code and certain structural features, including a County Reserve Account.

ESG CONSIDERATIONS
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 U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Property Assessed Clean Energy (PACE) Securitizations (July 31, 2019), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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