DBRS Morningstar Finalizes Provisional Ratings on PRPM 2021-RPL1, LLC

DBRS, Inc. (DBRS Morningstar) finalized the following provisional ratings on the Asset Backed Notes, Series 2021-RPL1 (the Notes) issued by PRPM 2021-RPL1, LLC (the Trust or the Issuer):

-- $158.1 million Class A-1 at AAA (sf)
-- $17.2 million Class A-2 at A (sf)
-- $7.9 million Class M-1 at BBB (sf)

The AAA (sf) rating on the Notes reflects 21.10% of credit enhancement provided by subordinated certificates. The A (sf) and BBB (sf) ratings reflect 13.65% and 9.75% of credit enhancement, respectively.

Other than the specified class above, DBRS Morningstar does not rate any other classes in this transaction.

The Trust is a securitization of a portfolio of seasoned performing and reperforming first-lien residential mortgages to borrowers who are currently in or have been in bankruptcy funded by the issuance of mortgage-backed securities (the Notes). The Notes are backed by 1,302 loans with a total principal balance of $203,000,655 as of the Cut-Off Date (June 30, 2021).

The mortgage loans are approximately 180 months seasoned. As of the Cut-Off Date, approximately 95.6% of the loans are current under the Mortgage Bankers Association (MBA) delinquency method, including 236 (17.8% of the loans) bankruptcy-performing loans.

Although the number of months clean (consecutively zero times 30 (0 x 30) days delinquent) at issuance is weaker relative to other DBRS Morningstar-rated seasoned transactions, the borrowers in this pool demonstrate reasonable cash flow velocity (as by number of payments over time) in the past six, 12, and 24 months.

The portfolio contains 87.0% modified loans. The modifications happened more than two years ago for 77.5% of the modified loans. Within the pool, 286 mortgages (27.8% of the pool) have non-interest-bearing deferred amounts of $11,352,739, which equate to approximately 5.6% of the total principal balance.

The loans are single family residential first lien mortgage notes where the borrowers are in a current Chapter 13, Chapter 11, Chapter 12 or Chapter 7 bankruptcy or have had their bankruptcies dismissed or discharged. As of the Cut-off-date, 80.6% of the portfolio is no longer in bankruptcy (dismissed or discharged); 17.2% is in Chapter 13; 2.0% is in Chapter 11; and 0.3% is either in Chapter 7 or Chapter 12 bankruptcy.

To satisfy the credit risk retention requirements, as of the closing date, the Sponsor or a majority-owned affiliate of the Sponsor will hold the Membership Certificate, which represents the initial overcollateralization amount.

Following the transfer of servicing from BSI Financial Services within 45 days after the Closing Date, Rushmore Loan Management Services LLC will be the servicer for approximately 70.4% of the loans in this transaction. SN Servicing Corporation is the servicer of approximately 29.6% of the loans in this transaction. The Servicers will not advance any delinquent principal and interest (P&I) on the mortgages; however, the Servicer is obligated to make advances in respect of prior liens, insurance, real estate taxes and assessments as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.

The Issuer has the option to redeem the Notes in full at a price equal to the sum of (1) the remaining aggregate Note Amount of the Notes, (2) any accrued and unpaid interest due on the Notes through the redemption date (including any Cap Carryover), and (3) any fees and expenses of the transaction parties, including any unreimbursed servicing advances (Redemption Price). Such Optional Redemption may be exercised in July 2024.

In addition, the Issuer is expected (but is not required) to redeem the offered Notes in full on the payment date in July 2026 (Expected Redemption Date). Assuming an Event of Default has not occurred, the Class A-2, Class M-1, Class B-1, and Class B-2 Notes are not entitled to any payments of principal prior to the Expected Redemption Date (other than from net sale proceeds after the Class A-1 Notes have been paid in full) and all available funds (other than the portion of available funds representing net sale proceeds) that would otherwise be available to pay principal on the Class A-2, Class M-1, Class B-1, and Class B-2 Notes after the Class A-1 Notes have been paid in full will instead be deposited into a redemption account and applied to pay interest and principal on the Class A-2, Class M-1, Class B-1, and Class B-2 Notes on the earlier of the Expected Redemption Date or the occurrence of a Credit Event, wherein the Issuer does not redeem the offered Notes in full on the Expected Redemption Date or an Event of Default occurs and is continuing.

On payment dates after a Credit Event, the coupon rate for the Notes will be 1.000% higher than the coupon rate before a Credit Event.

The transaction employs a sequential-pay cash flow structure. Principal and interest collections are commingled and are first used to pay interest and cap carryover amounts to the Notes and then to pay the classes until reduced to zero, which may provide for timely payment of interest to the rated Notes. The cash flow structure is discussed in more detail in the Cash Flow Structure and Features section of this report.

CORONAVIRUS IMPACT
The Coronavirus Disease (COVID-19) pandemic and the resulting isolation measures have caused an immediate economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. Shortly after the onset of the pandemic, DBRS Morningstar saw an increase in the delinquencies for many residential mortgage-backed securities (RMBS) asset classes.

Such mortgage delinquencies were mostly in the form of forbearances, which are generally short-term periods of payment relief that may perform very differently from traditional delinquencies. At the onset of the pandemic, the option to forbear mortgage payments was widely available, driving forbearances to an elevated level. When the dust settled, loans with coronavirus-induced forbearance in 2020 performed better than expected, thanks to government aid, low loan-to-value ratios, and acceptable underwriting in the mortgage market in general. Across nearly all RMBS asset classes in recent months delinquencies have been gradually trending downward, as forbearance periods come to an end for many borrowers.

In connection with the economic stress assumed under its moderate scenario (see “Global Macroeconomic Scenarios - June 2021 Update,” published on June 18, 2021), DBRS Morningstar may assume higher loss expectations for pools with loans on forbearance plans.

For more information regarding rating methodologies and the coronavirus, please see the following DBRS Morningstar press releases and commentary: "DBRS Morningstar Provides Update on Rating Methodologies in Light of Measures to Contain Coronavirus Disease (COVID-19)," dated March 12, 2020; "DBRS Morningstar Global Structured Finance Rating Methodologies and Coronavirus Disease (COVID19)," dated March 20, 2020; and “Global Macroeconomic Scenarios - June 2021 Update,” dated June 18, 2021.

The ratings reflect transactional strengths that include the following:
-- LTV ratios.
-- Satisfactory third-party due-diligence review.
-- Structural features.
-- Seasoning.

The transaction also includes the following challenges:
-- Loans in bankruptcy.
-- No servicer advances of delinquent P&I.
-- Assignments and endorsements.

The full description of the strengths, challenges, and mitigating factors is detailed in the related report.

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:
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 (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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

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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