DBRS Morningstar Finalizes Provisional Ratings on PATH 2022-1 Trust

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the Single-Family Rental Pass-Through Certificates issued by Pagaya AI Technology in Housing Trust 2022-1 (PATH 2022-1):

-- $96.1 million Class A at AAA (sf)
-- $25.3 million Class B at AA (high) (sf)
-- $10.8 million Class C at AA (sf)
-- $15.2 million Class D at A (sf)
-- $26.7 million Class E-1 at BBB (high) (sf)
-- $19.5 million Class E-2 at BBB (low) (sf)
-- $23.1 million Class F at BB (low) (sf)
-- $14.4 million Class G at B (sf)

The AAA (sf) rating on the Class A certificates reflects 61.5% of credit enhancement provided by subordinated notes in the pool. The AA (high) (sf), AA (sf), A (sf), BBB (high) (sf), BBB (low) (sf), BB (low) (sf), and B (sf) ratings reflect 51.3%, 47.0%, 40.9%, 30.2%, 22.3%, 13.0%, and 7.3% credit enhancement, respectively.

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

The PATH 2022-1 certificates are supported by the income streams and values from 846 rental properties. The properties are distributed across 11 states and 32 metropolitan statistical areas (MSAs) in the United States. DBRS Morningstar maps an MSA based on the ZIP code provided in the data tape, which may result in different MSA stratifications than those provided in offering documents. As measured by broker price opinion (BPO) value, 69.1% of the portfolio is concentrated in three states: Georgia (28.9%), Arizona (20.8%), and Florida (19.4%). The average value is $341,519. The average age of the properties is roughly 28 years. The majority of the properties have three or more bedrooms. The certificates represent a beneficial ownership in an approximately three-year, fixed-rate, interest-only (IO) loan with an initial aggregate principal balance of approximately $249.2 million.

The Sponsor intends to satisfy its risk-retention obligations under the U.S. Risk Retention Rules by Class H, which is 6.25% of the initial total issuance balance, either directly or through a majority-owned affiliate.

DBRS Morningstar assigned the provisional ratings to each class of certificates by performing a quantitative and qualitative collateral, structural, and legal analysis. This analysis uses DBRS Morningstar’s single-family rental subordination model and is based on DBRS Morningstar’s published criteria. DBRS Morningstar developed property-level stresses for the analysis of single-family rental assets. DBRS Morningstar assigned the provisional ratings to each class based on the level of stresses each class can withstand and whether such stresses are commensurate with the applicable rating level. DBRS Morningstar's analysis includes estimated base-case net cash flow (NCF) by evaluating the gross rent, concession, vacancy, operating expenses, and capital expenditure data. The DBRS Morningstar NCF analysis resulted in a minimum debt service coverage ratio of higher than 1.0 times.

Furthermore, DBRS Morningstar reviewed the third-party participants in the transaction, including the property manager, servicer, and special servicer. These transaction parties are acceptable to DBRS Morningstar. DBRS Morningstar also conducted a legal review and found no material rating concerns.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is U.S. Single-Family Rental Securitization Ratings Methodology (May 28, 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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