Press Release

DBRS Morningstar Finalizes Provisional Ratings on Wells Fargo Mortgage Backed Securities 2021-INV2 Trust

RMBS
November 23, 2021

DBRS, Inc. (DBRS Morningstar) finalized the following provisional ratings on the Mortgage Pass-Through Certificates, Series 2021-INV2 (the Certificates) issued by Wells Fargo Mortgage Backed Securities 2021-INV2 Trust as follows:

-- $290.5 million Class A-1 at AAA (sf)
-- $290.5 million Class A-2 at AAA (sf)
-- $217.9 million Class A-3 at AAA (sf)
-- $217.9 million Class A-4 at AAA (sf)
-- $72.6 million Class A-5 at AAA (sf)
-- $72.6 million Class A-6 at AAA (sf)
-- $174.3 million Class A-7 at AAA (sf)
-- $174.3 million Class A-8 at AAA (sf)
-- $116.2 million Class A-9 at AAA (sf)
-- $116.2 million Class A-10 at AAA (sf)
-- $43.6 million Class A-11 at AAA (sf)
-- $43.6 million Class A-12 at AAA (sf)
-- $47.2 million Class A-13 at AAA (sf)
-- $47.2 million Class A-14 at AAA (sf)
-- $25.4 million Class A-15 at AAA (sf)
-- $25.4 million Class A-16 at AAA (sf)
-- $22.1 million Class A-17 at AAA (sf)
-- $22.1 million Class A-18 at AAA (sf)
-- $312.5 million Class A-19 at AAA (sf)
-- $312.5 million Class A-20 at AAA (sf)
-- $312.5 million Class A-IO1 at AAA (sf)
-- $290.5 million Class A-IO2 at AAA (sf)
-- $217.9 million Class A-IO3 at AAA (sf)
-- $72.6 million Class A-IO4 at AAA (sf)
-- $174.3 million Class A-IO5 at AAA (sf)
-- $116.2 million Class A-IO6 at AAA (sf)
-- $43.6 million Class A-IO7 at AAA (sf)
-- $47.2 million Class A-IO8 at AAA (sf)
-- $25.4 million Class A-IO9 at AAA (sf)
-- $22.1 million Class A-IO10 at AAA (sf)
-- $312.5 million Class A-IO11 at AAA (sf)
-- $6.3 million Class B-1 at AA (sf)
-- $6.8 million Class B-2 at A (sf)
-- $6.0 million Class B-3 at BBB (sf)
-- $2.7 million Class B-4 at BB (sf)
-- $2.4 million Class B-5 at B (sf)

Classes A-IO1, A-IO2, A-IO3, A-IO4, A-IO5, A-IO6, A-IO7, A-IO8, A-IO9, A-IO10, and A-IO11 are interest-only certificates. The class balances represent notional amounts.

Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-9, A-10, A-11, A-13, A-15, A-17, A-19, A-20, A-IO2, A-IO3, A-IO4, A-IO6, and A-IO11 are exchangeable certificates. These classes can be exchanged for combinations of initial exchangeable certificates as specified in the offering documents.

Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-15, and A-16 are super-senior certificates. These classes benefit from additional protection from senior support certificates (Classes A-17 and A-18) with respect to loss allocation.

The AAA (sf) ratings on the Certificates reflect 8.55% of credit enhancement provided by subordinated certificates. The AA (sf), A (sf), BBB (sf), BB (high) (sf), and B (high) (sf) ratings reflect 6.70%, 4.70%, 2.95%, 2.15%, and 1.45% of credit enhancement, respectively.

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

The Trust is a securitization of a portfolio of first-lien, fixed-rate prime conventional investment-property residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 1,270 loans with a total principal balance of $359,751,376 as of the Cut-Off Date (November 1, 2021).

The pool consists of fully amortizing fixed-rate mortgages (FRMs) with original terms to maturity of primarily 30 years and a weighted-average (WA) loan age of four months.

In contrast to prior DBRS Morningstar-rated WFMBS prime transactions, WFMBS 2021-INV2 is composed of 100% conforming loans made to investors, which were underwritten using an automated underwriting system (AUS) designated by Fannie Mae or Freddie Mac and were eligible for purchase by such agencies. Details on the underwriting of conforming loans can be found in the Key Probability of Default Drivers section of the related Rating Report.

In addition, the pool contains a moderate concentration of loans that had desktop appraisals (14.4%). In its analysis, DBRS Morningstar applied property value haircuts to such loans, which increased the expected losses on the collateral.

All of the mortgage loans were either (1) originated by Wells Fargo Bank, N.A. (Wells Fargo) or (2) acquired by Wells Fargo from a qualified correspondent. Wells Fargo is also the Servicer, Mortgage Loan Seller, and Sponsor of the transaction. DBRS Morningstar rates Wells Fargo’s Long-Term Issuer and Long-Term Senior Debt rating at AA with Negative trends and its Short-Term Instruments at R-1 (high) with a Negative trend.

Computershare Trust Company, N.A. will act as the Master Servicer, Securities Administrator, and Custodian. Wilmington Savings Fund Society, FSB will serve as Trustee. Wipro Opus Risk Solutions, LLC will act as the representation and warranty (R&W) Independent Reviewer.

The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

The Sponsor, directly or indirectly through a majority-owned affiliate, will retain an eligible vertical interest, representing at least 5% of the economic interest in the credit risk of the assets to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder.

Coronavirus Pandemic Impact
The coronavirus 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. DBRS Morningstar saw increases in delinquencies for many residential mortgage-backed securities (RMBS) asset classes, shortly after the onset of coronavirus.

Such mortgage delinquencies were mostly in the form of forbearance, which are generally short-term payment reliefs that may perform very differently from traditional delinquencies. At the onset of coronavirus, because the option to forebear mortgage payments was so widely available, it drove forbearance to a very high level. When the dust settled, coronavirus-induced forbearance in 2020 performed better than expected, thanks to government aid, low loan-to-value ratios, and good underwriting in the mortgage market in general. Across nearly all RMBS asset classes, delinquencies have been gradually trending down in recent months as forbearance periods come to an end for many borrowers.

As of the Cut-Off Date, there are no loans that are subject to an active coronavirus-related forbearance plan with the Servicer. Any loan that enters into a coronavirus-related forbearance plan after the Cut-Off Date and prior to or on the Closing Date will be repurchased within 30 days of the Closing Date. Loans that enter into a coronavirus-related forbearance plan after the Closing Date will remain in the pool.

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

The ratings reflect transactional strengths that include high-quality credit attributes, well-qualified borrowers, financial strength of the counterparties, structural enhancements, and 100% current loans.

The ratings reflect transactional challenges that include 100% investor properties and certain borrowers with multiple mortgages in the securitized pool, loans with desktop appraisals, the representations and warranties framework, and third-party due diligence that did not meet the sample size suggested by DBRS Morningstar.

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

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.

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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