DBRS Morningstar Finalizes Provisional Ratings on RMF Proprietary Issuance Trust 2021-2

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following Asset-Backed Notes, Series 2021-2, issued by RMF Proprietary Issuance Trust 2021-2 (RPIT 2021-2):

-- $242.2 million Class A at AAA (sf)
-- $10.5 million Class M-1 at AA (sf)
-- $7.5 million Class M-2 at A (sf)
-- $10.5 million Class M-3 at BBB (sf)

The AAA (sf) rating reflects 108.1% of cumulative advance rate. The AA (sf), A (sf), and BBB (sf) ratings reflect 112.8%, 116.1%, and 120.8% of cumulative advance rates, respectively.

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

Lenders typically offer reverse mortgage loans to people who are at least 62 years old. Through reverse mortgage 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. Reverse mortgages 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.

As of the July 31, 2021, cut-off date, the collateral has approximately $224.1 million in current unpaid principal balance from 303 performing, nonrecourse, fixed and adjustable-rate jumbo reverse mortgage loans secured by first liens on single-family residential properties, condominiums, multifamily (two- to four-family) properties, and planned-unit developments. The loans were originated in 2021.

The transaction uses a structure in which cash distributions are made sequentially to each rated note until the rated amounts with respect to such notes are paid off. No subordinate note shall receive any payments until the balance of senior notes has been reduced to zero, and the subordinate notes will not be eligible for principal payments even if Class A pays off prior to the expected redemption date. As a result, the subordinate classes are initially locked out of cash distribution. Interest is capitalized to the note balances of the Class M notes, and the Class A notes will accrue cap carryover for any interest shortfalls, except that, with respect to the Class A notes, timely interest payments are expected to be made using the term payment reserve, set-aside reserve, and line of credit reserve accounts in any period in which there are insufficient available funds. In the event that the set-aside reserve account is insufficient, the term payment and line of credit reserve account may be used to supplement. These used reserve accounts are replenished with available cash.

For more information regarding the economic stress assumed under its baseline scenario, please see the following DBRS Morningstar commentary: “Baseline Macroeconomic Scenarios For Rated Sovereigns,” dated September 8, 2021.

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 U.S. Reverse Mortgage Securitization Ratings Methodology (May 8, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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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