DBRS Morningstar Assigns Ratings to Six Invitation Homes Trust Transactions

DBRS, Inc. (DBRS Morningstar) assigned ratings to the following five transactions issued by Invitation Homes (IH) trusts and one transaction issued by a Starwood Waypoint Homes (SWH) trust (together, the Covered Transactions). On or before May 9, 2018, Starwood Waypoint Homes merged with Invitation Homes (the INVH/SWH Merger Agreement), which resulted in the combination of the Starwood Waypoint Homes platform with the Invitation Homes platform.

IH 2017-SFR2
-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)

IH 2018-SFR1
-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)

IH 2018-SFR2
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (sf)

IH 2018-SFR3
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)

IH 2018-SFR4
-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)

SWH 2017-1
-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)

IH 2017-SFR2 Class E was repaid and Morningstar Credit Ratings, LLC (MCR) withdrew its rating on Class E on December 26, 2019. As a result, DBRS Morningstar does not rate Class E.

On or before May 9, 2018, SWH merged with IH, which resulted in the combination of their platforms.

These securities are currently also rated by DBRS Morningstar’s 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 August 21, 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upon withdrawal of MCR’s outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings.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 www.morningstarcreditratings.com.

The Covered Transactions are single-family rental transactions.

As stated in its May 28, 2020, press release, “DBRS and Morningstar Credit Ratings Confirm U.S. Single-Family Rental Asset Class Coverage,” DBRS Morningstar applied MCR’s “U.S. Single-Family Rental Securitization Ratings Methodology” to assign these ratings.

DBRS Morningstar’s ratings are based on the following analytical considerations:
-- DBRS Morningstar reviewed MCR’s rating analysis on the Covered Transactions on or prior to the closing dates, including the collateral pool, cash flow analysis, legal review, operational risk review, third-party due diligence, and representations and warranties (R&W) framework.

-- DBRS Morningstar notes that MCR and/or its external counsel had performed a legal analysis, which included but was not limited to legal opinions and various transaction documents as part of its process of assigning ratings to the Covered Transactions on or prior to the closing dates. For the purpose of assigning new ratings to the Covered Transactions, DBRS Morningstar did not perform additional legal analysis unless otherwise indicated in this press release.

-- DBRS Morningstar relied on MCR’s operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable.

-- DBRS Morningstar reviewed key transaction performance indicators, as applicable, since the closing dates as reflected in bond factors, loan-to-value (LTV) ratios or credit enhancements, vacancies, delinquencies, capital expenditures (capex), and cumulative losses.

RATING AND CASH FLOW ANALYSIS
DBRS Morningstar reviewed MCR’s rating analysis on the Covered Transactions, which used the Morningstar Single-Family Rental Subordination Model to generate property-level cash flows for the Covered Transactions. The analytics included calculating the debt service coverage ratio needed to adequately cover the monthly debt service in each period under a given rating stress and examining the sufficiency of the aggregate stressed property liquidation values to cover the unpaid balance at a given rating level in accordance with MCR’s “U.S. Single-Family Rental Securitization Ratings Methodology.”

OPERATIONAL RISK REVIEW
DBRS Morningstar relied on MCR’s operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable.

HISTORICAL PERFORMANCE
DBRS Morningstar reviewed the historical performance of the Covered Transactions as reflected in bond factors, LTVs or credit enhancements, vacancies, delinquencies, capex, and cumulative losses and deemed the transactions’ performances to be satisfactory.

THIRD-PARTY DUE DILIGENCE
Several third-party review firms (the TPR firms) performed due-diligence reviews of the Covered Transactions. DBRS Morningstar has not conducted reviews of the TPR firms. The scope of the due diligence generally comprised lease, valuation, title, and homeowners’ association discrepancy reviews. DBRS Morningstar also relied on the written attestations the TPR firms provided to MCR on or prior to the closing dates.

R&W FRAMEWORK
DBRS Morningstar conducted reviews of the R&W frameworks for the Covered Transactions. The reviews covered key considerations, such as the R&W provider, breach discovery, enforcement mechanism, and remedy.

CORONAVIRUS DISEASE (COVID-19) ANALYSIS
To reflect the current concerns and conditions surrounding the coronavirus pandemic, DBRS Morningstar tested the following additional rating assumptions for single-family rental transactions to reflect the moderate macroeconomic scenario outlined in its commentary, “Global Macroeconomic Scenarios: July Update,” published on July 22, 2020:
-- Vacancy (higher vacancy rate assumptions to account for potential increases in single-family rental vacancies as a result of rising unemployment and further economic deterioration).

-- Home prices (an additional property valuation haircut to account for the potential decline in broader asset markets).

The ratings DBRS Morningstar assigned to the Covered Transactions were able to withstand the additional coronavirus assumptions with minimal to no rating volatilities.

SUMMARY
The ratings are a result of DBRS Morningstar’s application of MCR’s “U.S. Single-Family Rental Securitization Ratings Methodology” unless otherwise indicated in this press release.

DBRS Morningstar’s ratings address the timely payment of interest (other than payment-in-kind bonds) and full payment of principal by the rated final maturity date in accordance with the terms and conditions of the related securities.

The ratings DBRS Morningstar 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 considered the rating analysis detailed in this press release and may have made qualitative adjustments for the analytical considerations that are not fully captured by the quantitative model.

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:
The principal methodology is the U.S. Single-Family Rental Securitization Ratings Methodology (May 28, 2020), which can be found on www.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.

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.

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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