DBRS Morningstar Discontinues Credit Ratings on Finance of America Structured Securities Trust JR2, Series 2020-JR4

DBRS, Inc. (DBRS Morningstar) discontinued its credit ratings on the following two classes from Finance of America Structured Securities Trust JR2, Series 2020-JR4as a result of repayment:

-- Mortgage-Backed Notes, Series 2020-JR4, Class A1
-- Mortgage-Backed Notes, Series 2020-JR4, Class A2

DBRS Morningstar’s credit rating actions are based on the following analytical considerations:

-- The discontinued credit ratings reflect the full repayment of principal to bondholders.
-- The pools backing the reviewed residential mortgage-backed security transactions consist of reverse mortgage (RM) collateral.

In connection with the economic stress assumed under its moderate scenario (see “Baseline Macroeconomic Scenarios for Rated Sovereigns: June 2023 Update,” published on June 30, 2023), DBRS Morningstar advances the mortality curve of all the RM borrowers by four years, advances all foreclosure timelines to a AAA scenario timeline, and applies an immediate 10% valuation haircut to all loans.

RM LOANS
Lenders typically offer RM loans to people who are at least 62 years old. Through RM 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 if (1) the borrower dies, (2) the borrower sells the related residence, (3) the borrower no longer occupies the related residence for a period (usually a year), (4) it is no longer the borrower’s primary residence, (5) a tax or insurance default occurs, or (6) the borrower fails to properly maintain the related residence. In addition, borrowers must be current on any homeowner’s association dues if applicable. RMs are typically nonrecourse; borrowers do not 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.

ENVIRONMENTAL, SOCIAL, AND 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/416784 (July 4, 2023).

Notes:

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

The principal methodology applicable to the credit ratings is: Rating and Monitoring U.S. Reverse Mortgage Securitizations (July 17, 2023; https://www.dbrsmorningstar.com/research/417277/rating-and-monitoring-u.s.-reverse-mortgage-securitizations).

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023),
https://www.dbrsmorningstar.com/research/415687

Legal Criteria for U.S. Structured Finance (December 7, 2022),
https://www.dbrsmorningstar.com/research/407008

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