DBRS Morningstar Assigns Provisional Ratings to Boston Lending Trust 2022-1

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following Asset-Backed Notes, Series 2022-1, to be issued by Boston Lending Trust 2022-1:

-- $189.8 million Class A at AAA (sf)
-- $7.4 million Class M-1 at AA (sf)
-- $7.4 million Class M-2 at A (sf)
-- $6.3 million Class M-3 at BBB (sf)

The AAA (sf) rating reflects 105.0% of cumulative advance rate. The AA (sf), A (sf), and BBB (sf) ratings reflect 109.1%, 113.2%, and 116.7% 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 December 31, 2021, cut-off date, the collateral had approximately $180.8 million in unpaid principal balance (UPB) from 247 performing, nonrecourse, fixed-rate, 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 all originated in 2021. Out of the 247 loans, 146 (65.4% of the UPB) are fixed-rate loans with a weighted-average coupon (WAC) of 6.7%, while the remaining 101 (34.6% of the UPB) loans are indexed to three-month Libor with a WAC of 5.5%.

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 the Class A notes pay 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 interest reserve funds in any period in which there are insufficient available funds.

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.

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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