DBRS Morningstar Confirms 205 Ratings from Six U.S. RMBS Transactions

DBRS, Inc. (DBRS Morningstar) reviewed 205 classes from six U.S. residential mortgage-backed security (RMBS) transactions. Of the 205 classes reviewed, DBRS Morningstar confirmed all 205 ratings.

The rating confirmations reflect asset performance and credit-support levels that are consistent with the current ratings.

DBRS Morningstar’s rating actions are based on the following analytical considerations:

-- Key performance measures as reflected in month-over-month changes in delinquency (including forbearance) percentages, credit enhancement (CE) increases since deal inception, and CE levels relative to 30-day+ delinquencies.

-- Offset of mortgage-relief initiatives via direct-to-consumer economic aid, mortgage payment assistance, and foreclosure suspension directives.

-- Elevated economic concerns and more conservative home price assumptions.

As a result of the Coronavirus Disease (COVID-19) pandemic, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers’ ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans.

In connection with the economic stress assumed under its moderate scenario (see “Global Macroeconomic Scenarios: March 2021 Update,” published on March 17, 2021), DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. DBRS Morningstar derives such MVD assumptions through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario.

The pools backing the reviewed RMBS transactions consist of Re-Performing Loan (RPL), Non-Qualified Mortgage (Non-QM), and Prime collateral.

RPL
In the RPL asset class, DBRS Morningstar generally believes that loans which were previously delinquent, recently modified, or have higher updated loan-to-value (LTV) ratios may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with previous delinquencies or recent modifications have exhibited difficulty in fulfilling payment obligations in the past and may revert back to spotty payment patterns in the near term. Higher LTV borrowers with lower equity in their properties generally have fewer refinance opportunities and, therefore, slower prepayments.

NON-QM
In the Non-QM asset class, DBRS Morningstar generally believes that loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher LTV borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers with lower equity in their properties generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy.

PRIME
In the prime asset class, DBRS Morningstar generally believes this sector should have low intrinsic credit risk. Within the prime asset class, loans originated to (1) self-employed borrowers or (2) higher LTV borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments.

The ratings assigned to the securities listed below differ from the ratings implied by the quantitative model. DBRS Morningstar considers this difference to be a material deviation; however, in this case, the ratings on the subject securities reflect actual deal/tranche performance that is not fully reflected in the projected cash flows/model output. Generally for RMBS transactions, the reporting of recent forbearance-related delinquencies (as opposed to nonforbearance-related delinquencies) in remittance reports has not been consistent and standardized. DBRS Morningstar believes that recent increases in delinquencies mostly reflect forbearances being requested and granted as a result of the coronavirus pandemic. Additionally, DBRS Morningstar believes that forbearance-related delinquencies, especially during the coronavirus pandemic, should have a lower probability of default than nonforbearance-related delinquencies. Because of the lack of standardized reporting, DBRS Morningstar may not be able to appropriately identify delinquencies as a result of forbearance in its loss analysis; thus, for certain transactions, DBRS Morningstar may have projected significantly higher expected losses using its quantitative model. After reviewing transaction-level performance trends and other analytical considerations outlined in this press release, however, DBRS Morningstar may assign ratings that differ from those implied by the quantitative model, thus resulting in a material deviation.

-- GS Mortgage-Backed Securities Trust 2020-PJ3, Mortgage Pass-Through Certificates, Series 2020-PJ3, Class B-5
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B-5
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B-5A
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B-5B
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B-5C
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B-5D
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B5-IOA
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B5-IOB
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B5-IOC
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B5-IOD
-- New Residential Mortgage Loan Trust 2020-2, Mortgage-Backed Notes, Series 2020-2, Class B-7
-- Legacy Mortgage Asset Trust 2020-RPL1, Mortgage-Backed Notes, Series 2020-RPL1, Class A-4
-- Legacy Mortgage Asset Trust 2020-RPL1, Mortgage-Backed Notes, Series 2020-RPL1, Class A-5
-- Legacy Mortgage Asset Trust 2020-RPL1, Mortgage-Backed Notes, Series 2020-RPL1, Class M-1
-- Legacy Mortgage Asset Trust 2020-RPL1, Mortgage-Backed Notes, Series 2020-RPL1, Class M-2
-- Legacy Mortgage Asset Trust 2020-RPL1, Mortgage-Backed Notes, Series 2020-RPL1, Class B-1
-- Legacy Mortgage Asset Trust 2020-RPL1, Mortgage-Backed Notes, Series 2020-RPL1, Class B-2
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M1
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M2
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class B1
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class B2
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M1A
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M1AX
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M1B
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M1BX
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M2A
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M2AX
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M2B
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class M2BX
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class A4
-- Towd Point Mortgage Trust 2020-2, Asset-Backed Securities, Series 2020-2, Class A5
-- Verus Securitization Trust 2020-2, Mortgage Pass-Through Certificates, Series 2020-2, Class B-2

The rating actions are the result of DBRS Morningstar’s application of its “U.S. RMBS Surveillance Methodology,” published on February 21, 2020.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
The principal methodologies are the U.S. RMBS Surveillance Methodology (February 21, 2020) and RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020), 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.

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 these credits or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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