DBRS Morningstar Publishes Final Mortgage Insurance (MI) Credit Appendix to the RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology

DBRS Morningstar finalized its Mortgage Insurance (MI) Credit Appendix to the RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology. This methodology and predictive model present the criteria for which U.S. residential mortgage-backed securities (RMBS) ratings are assigned.

The methodology supersedes the prior version published on March 3, 2023, and is effective as of August 9, 2023.

As detailed in the appendix, RMBS Insight Model 1.3 has been enhanced to estimate a mortgage insurer's payout and to give credit to mortgage insurance (MI) in its loss severity analysis for RMBS transactions. With the addition of Appendix 9, DBRS Morningstar considers the mortgage insurer's willingness and ability to pay to estimate the amount of MI credit, among other factors.

The appendix is considered material but is not expected to have ratings impact on any outstanding DBRS Morningstar-rated U.S. RMBS securities. DBRS Morningstar currently gives credit to MI for government-sponsored enterprise credit risk transfer high loan-to-value securitizations due to Fannie Mae’s and Freddie Mac’s back-stop to the related MI in these transactions. Additionally, for legacy RMBS transactions, DBRS Morningstar generally does not give any credit to MI.

Finalization of this methodology follows the conclusion of the request for comment period that began on May 23, 2023. DBRS Morningstar received nonmaterial comments during the request for comment period related to its Mortgage Insurance (MI) Credit Appendix to the RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology.

All comments received during the request for comment period have been published to the DBRS Morningstar website, except in cases where confidentiality is requested by the respondent: https://www.dbrsmorningstar.com/research/418983.

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.