DBRS Morningstar Takes Rating Actions on Two U.S. RMBS Transactions

DBRS, Inc. (DBRS Morningstar) reviewed seven classes from two U.S. residential mortgage-backed security (RMBS) transactions. Of the seven classes reviewed, DBRS Morningstar confirmed all seven 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 consideration:

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

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 advances the mortality curve of all the reverse mortgage (RM) borrowers by four years, advances all foreclosure timelines to a AAA-scenario timeline, and applies an immediate 10% valuation haircut to all loans.

The pools backing the reviewed RMBS transactions consist of reverse mortgage collateral.

Reverse Mortgage Loans
Lenders typically offer RM loans to people who are at least 62 years old. Through RM loans, borrowers have access to home equity through a lump sum amount or a stream of payments without periodically repaying principal or interest, allowing the loan balance to accumulate over a period of time until a maturity event occurs. Loan repayment is required (1) if the borrower dies, (2) if the borrower sells the related residence, (3) if the borrower no longer occupies the related residence for a period (usually a year), (4) if it is no longer the borrower’s primary residence, (5) if a tax or insurance default occurs, or (6) if the borrower fails to properly maintain the related residence. In addition, borrowers must be current on any homeowner’s association dues if applicable. RMs are typically nonrecourse; borrowers don’t have to provide additional assets in cases where the outstanding loan amount exceeds the property’s value (the crossover point). As a result, liquidation proceeds will fall below the loan amount in cases where the outstanding balance reaches the crossover point, contributing to higher loss severities for these loans.

The notes included are:

-- RMF Proprietary Issuance Trust 2019-1, Asset-Backed Notes, Series 2019-1, Class A
-- RMF Proprietary Issuance Trust 2019-1, Asset-Backed Notes, Series 2019-1, Class M-1
-- RMF Proprietary Issuance Trust 2019-1, Asset-Backed Notes, Series 2019-1, Class M-2
-- RMF Proprietary Issuance Trust 2020-1, Asset-Backed Notes, Series 2020-1, Class A
-- RMF Proprietary Issuance Trust 2020-1, Asset-Backed Notes, Series 2020-1, Class M-1
-- RMF Proprietary Issuance Trust 2020-1, Asset-Backed Notes, Series 2020-1, Class M-2
-- RMF Proprietary Issuance Trust 2020-1, Asset-Backed Notes, Series 2020-1, Class M-3

The rating actions are the result of DBRS Morningstar’s application of its “U.S. Reverse Mortgage Securitization Ratings Methodology” published on May 8, 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 methodology is the U.S. Reverse Mortgage Securitization Ratings Methodology (May 8, 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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