DBRS Morningstar Finalizes New Methodology and Two New Exhibits for Home Equity Investments

DBRS Morningstar finalized the new appendix to its “Rating and Monitoring U.S. Reverse Mortgage Securitizations” methodology as well as the new exhibits in the “Operational Risk Assessment for U.S. RMBS Originators” and “Operational Risk Assessment for U.S. RMBS Servicers” methodologies. The new appendix and exhibits present the criteria for which the new U.S. Home Equity Investments (HEI) asset class ratings are assigned and/or monitored:

-- Rating and Monitoring U.S. Reverse Mortgage Securitizations (Appendix 3—Home Equity Investments Methodology)
-- Operational Risk Assessment for U.S. RMBS Originators (Exhibit V — Sample Operational Risk Questions for U.S. Home Equity Investment Originators)
-- Operational Risk Assessment for U.S. RMBS Servicers (Exhibit IV — Sample Operational Risk Questions for U.S. Home Equity Investment Servicers)

The “Rating and Monitoring U.S. Reverse Mortgage Securitizations” methodology supersedes the prior version published on November 23, 2022, and is effective as of July 17, 2023.

The “Operational Risk Assessment for U.S. RMBS Originators” and the “Operational Risk Assessment for U.S. RMBS Servicers” methodologies supersede the prior versions published on November 23, 2022, and are effective as of July 17, 2023.

The methodologies add coverage for the HEI asset class but make no changes to the criteria for which U.S. reverse mortgage asset class ratings are assigned and/or monitored. Accordingly, DBRS Morningstar will not be making any associated changes to outstanding reverse mortgage ratings as direct a consequence of these methodology updates.

Finalization of these methodologies follows the conclusion of the request for comment period that began on June 12, 2023. DBRS Morningstar received several comments (confidentiality requested by the respondents) during the request for comment period. A number of these comments were observational about the sector in general, and/or were editorial, relating to minor language change suggestions for the purpose of clarification. The editorial comments were deemed to have no material impact on the methodology. The bulk of comments related to the naming convention for the asset class, suggesting the term “Home Equity Investments,” which DBRS Morningstar adopted.

Notes:
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.

DBRS Morningstar methodologies are publicly available on its website www.dbrsmorningstar.com under Methodologies & Criteria.

For more information on this methodology or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.