/raid1/www/Hosts/bankrupt/TCR_Public/210704.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, July 4, 2021, Vol. 25, No. 184
Headlines
AGL CLO 5: S&P Assigns BB- (sf) Rating on $32MM Class E-R Notes
AIG CLO 2020-1: S&P Assigns BB- (sf) Rating on Class E-R Notes
AIR CANADA 2020-1C: S&P Lowers Class C Certs Rating to B+(sf)
ALLEGRO CLO XIII: Moody's Assigns Ba3 Rating to Class E Notes
AMERICAN AIRLINES 2013-1: S&P Lowers Rating on 4 Classes to B
AMSR 2021-SFR2: DBRS Gives Prov. BB(low) Rating to Class F-2 Certs
ANCHORAGE CAPITAL 17: Moody's Assigns Ba3 Rating to Class E Notes
ANGEL OAK 2021-3: Fitch Assigns B(EXP) Rating on Class B-2 Debt
APEX CREDIT 2021: S&P Assigns BB- (sf) Rating on Class E Notes
ARROYO MORTGAGE 2021-1R: DBRS Gives Prov. B Rating on B-2 Notes
ARROYO MORTGAGE 2021-1R: S&P Assigns Prelim B Rating on B-2 Notes
BALBOA BAY 2021-1: S&P Assigns BB- (sf) Rating on Class E Notes
BATTALION CLO VII: Moody's Hikes $4MM Class E-RR Notes to B1
BENCHMARK 2019-B12 MORTGAGE: Fitch Rates Class G-RR Certs 'B-'
BENCHMARK 2021-B27: Fitch Assigns B- Rating on J-RR Certs
CANYON CLO 2021-3: S&P Assigns BB- (sf) Rating on Class E Notes
CARVANA AUTO 2021-P2: DBRS Finalizes BB(high) Rating on N Notes
CARVANA AUTO 2021-P2: S&P Assigns BB (sf) Rating on Class N Notes
CEDAR FUNDING IV: Moody's Assigns Ba3 Rating to Class E-RR Notes
CFMT 2021-HB6: DBRS Finalizes B(high) Rating on Class M5 Notes
CIFC FUNDING 2021-IV: S&P Assigns Prelim BB-(sf) Rating on E Notes
CITIGROUP 2021-INV1: Moody's Gives (P)B2 Rating to Cl. B-5 Certs
CITIGROUP 2021-INV1: S&P Assigns Prelim B (sf) Rating on B-5 Certs
CITIGROUP 2021-RP4: Fitch Assigns Final B Rating on B-2 Debt
CITIGROUP MORTGAGE 2021-RP4: Fitch Gives B(EXP) Rating to B-2 Debt
CREDIT SUISSE 2007-C5: Fitch Affirms D Rating on 15 Tranches
CROWN POINT 10: S&P Assigns BB- (sf) Rating on Class E Notes
CSMC 2021-NQM4: Fitch Gives 'B(EXP)' Rating to Class B-2 Debt
CSWF 2021-SOP2: S&P Assigns B- (sf) Rating on Class F Certificates
DBJPM 2016-C1: DBRS Lowers Class F Certs Rating to CCC
DELTA AIR 2015-1: S&P Lowers Class B Certs Rating to BB+(sf)
DRYDEN 87: S&P Assigns Prelim. BB- (sf) Rating on Class E Notes
ELEVATION CLO 2021-13: S&P Assigns Prelim 'BB-' Rating on E Notes
ELMWOOD CLO IX: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
FIRSTKEY HOMES 2021-SFR1: DBRS Gives Prov. BB Rating on 2 Classes
FLAGSTAR MORTGAGE 2021-4: DBRS Finalizes B Rating on Cl. B-5 Certs
FLAGSTAR MORTGAGE 2021-4: Fitch Rates Class B-5 Certs 'Bsf'
FLAGSTAR MORTGAGE 2021-5INV: Moody's Rates Class B-5 Certs 'B3'
FREDDIE MAC 2020-HQA4: Moody's Hikes 10 Tranches From Ba2
FREDDIE MAC 2021-HQA2: Moody's Assigns Ba2 Rating to 10 Tranches
GCAT 2021-NQM3: S&P Assigns B (sf) Rating on Class B-2 Certs
GS MORTGAGE 2019-GC40: DBRS Confirms B Rating on Class G-RR Certs
GS MORTGAGE 2020-PJ4: Moody's Hikes Cl. B-5 Certs Rating to Ba3
GULF STREAM 5: S&P Assigns BB-(sf) Rating on $16.5MM Class D Notes
HALSEYPOINT CLO 4: S&P Assigns BB- (sf) Rating on Class E Notes
HPS LOAN 10-2016: S&P Assigns B- (sf) Rating on Class E Notes
IVY HILL XII: S&P Assigns Prelim BB- (sf) Rating on Class D-R Notes
JP MORGAN 2005-CIBC11: Moody's Lowers Cl. X-1 Certs Rating to C
JP MORGAN 2012-C6: Fitch Lowers Class H Certs Rating to 'CC'
JP MORGAN 2019-ICON: DBRS Confirms B(low) Rating on Class G Certs
KKR CLO 34: Moody's Assigns Ba3 Rating to $22.5MM Class E Notes
MADISON PARK LI: Moody's Assigns Ba3 Rating to $20MM Class E Notes
MADISON PARK LI: Moody's Gives (P)Ba3 Rating to Class E Notes
MCF CLO VII: S&P Assigns BB- (sf) Rating on Class E-R Notes
MELLO MORTGAGE 2021-INV1: DBRS Finalizes B Rating on Class B5 Certs
MELLO MORTGAGE 2021-MTG3: DBRS Gives Prov. B Rating on B5 Certs
MELLO MORTGAGE 2021-MTG3: Moody's Assigns (P)B2 Rating to B5 Certs
MF1 2021-FL6: DBRS Finalizes B(low) Rating on Class G Notes
MFA 2021-RPL1: DBRS Finalizes B Rating on Class B-2 Notes
MORGAN STANLEY 2021-3: Fitch Assigns Final B Rating on B-5 Debt
NEUBERGER BERMAN 37: S&P Assigns BB- (sf) Rating on Class E-R Notes
NEUBERGER BERMAN 42: S&P Assigns BB- (sf) Rating on Class E Notes
NEUBERGER BERMAN 43: S&P Assigns Prelim BB- (sf) Rating on E Notes
NIAGARA PARK: S&P Assigns Prelim BB-(sf) Rating on Class E-R Notes
OBX 2021-NQM2: S&P Assigns B+ (sf) Rating on Class B-2 Notes
OCEAN TRAILS XI: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
OHA CREDIT 3: S&P Assigns Prelim BB-(sf) Rating on Class E-R Notes
POINT AU ROCHE: S&P Assigns Prelim BB-(sf) Rating on Class E Notes
RATE MORTGAGE 2021-J1: Moody's Assigns (P)B3 Rating to B-5 Certs
RCKT MORTGAGE 2021-2: Fitch Rates Class B-5 Certificates 'Bsf'
RCKT MORTGAGE 2021-2: Moody's Assigns B3 Rating to Cl. B-5 Certs
SEQUOIA MORTGAGE 2021-5: Fitch Assigns BB- Rating on B-4 Certs
SLG OFFICE 2021-OVA: DBRS Finalizes B Rating on Class G Certs
SOUND POINT XXX: Moody's Assigns Ba3 Rating to $20MM Class E Notes
STARWOOD MORTGAGE 2021-3: DBRS Gives Prov. B Rating on B-2 Certs
SYMPHONY CLO XVIII: Moody's Rates $2MM Class F-R Notes 'B3'
THREE ACCESS 2004-1: S&P Assigns CC (sf) Rating on Class B Notes
TRYSAIL CLO 2021-1: S&P Assigns BB- (sf) Rating on Class E Notes
UNITED AIRLINES 2014-1: S&P Affirms BB(sf) Rating on Class B Certs
VERUS SECURITIZATION 2021-3: S&P Assigns 'B-' Rating on B-2 Notes
WELLS FARGO 2021-RR1: Fitch Assigns B+ Rating on B-5 Debt
WELLS FARGO 2021-RR1: Moody's Rates Class B-5 Certs 'Ba3'
WFRBS COMMERCIAL 2014-C19: Moody's Affirms Ba1 Rating on X-B Certs
WIND RIVER 2019-1: S&P Assigns B-(sf) Rating on $3MM Cl. F-R Notes
Z CAPITAL 2021-1: Moody's Assigns Ba3 Rating to Class E Notes
[*] S&P Takes Various Actions on 24 Classes from Six CLO Deals
*********
AGL CLO 5: S&P Assigns BB- (sf) Rating on $32MM Class E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A1R, A2R, BR,
CR, DR, and ER replacement notes from AGL CLO 5 Ltd., a CLO
originally issued in June 2020 that is managed by AGL CLO Credit
Management LLC.
The replacement notes are being issued via a supplemental
indenture, which outlines the terms of the replacement notes.
According to the supplemental indenture:
-- The replacement class A1R, A2R, BR, CR, DR, and ER notes were
issued at a lower spread over three-month LIBOR than the original
notes.
-- The stated maturity and reinvestment period was extended by
four years.
-- The non-call period was extended to June 2023.
-- The weighted average life test date was extended to nine years
after the closing date.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
AGL CLO 5 Ltd.
Class A1R, $496.00 million: AAA (sf)
Class A2R, $24.00 million: NR
Class BR, $88.00 million: AA (sf)
Class CR (deferrable), $48.00 million: A (sf)
Class DR (deferrable), $48.00 million: BBB- (sf)
Class ER (deferrable), $32.00 million: BB- (sf)
Subordinated notes, $65.10 million: NR
Ratings Withdrawn
AGL CLO 5 Ltd.
Class A-1: to NR from AAA (sf)
Class B: to NR from AA (sf)
Class C: to NR from A (sf)
Class D: to NR from BBB- (sf)
Class E: to NR from BB-(sf)
NR--Not rated.
AIG CLO 2020-1: S&P Assigns BB- (sf) Rating on Class E-R Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement notes and new class A-L notes from AIG CLO
2020-1 LLC, a CLO originally issued in 2020 that is managed by AIG
Credit Management LLC. At the same time, S&P withdrew its ratings
on the original class A, B, C, D, and E notes and class I and II
exchangeable secured notes following payment in full on the June
24, 2021, refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class A-R, B-R, C-R, D-R, and E-R notes were
issued at lower spreads over three-month LIBOR than the original
notes and benefit from higher subordination compared to before the
reset.
-- The new floating-rate class A-L notes were issued pari passu to
the replacement class A-R notes, with identical spread over
three-month LIBOR.
-- The stated maturity was extended by approximately five years,
the reinvestment period was extended by five years, the non-call
period was extended by two years, and the weighted average life
test date was extended by four years.
-- The post reset structure does not include replacement classes
for the original class F notes and class I and II exchangeable
secured notes.
-- The required minimum overcollateralization and interest
coverage ratios were amended.
-- A portion of the proceeds remaining from the replacement note
issuance (after the simultaneous existing class redemption) will be
used to purchase additional collateral. However, there will not be
an additional effective date or ramp-up period, and the first
payment date following the June 24, 2021, refinancing date will be
Oct. 15, 2021.
-- The transaction updated language regarding the purchase of
workout-related assets. The transaction also added a 5%
concentration in senior secured and unsecured bonds, with unsecured
bonds limited to 2.5%. In addition, the transaction has adopted
benchmark replacement language and made updates to conform to
current rating agency methodology.
Replacement And Original Note Issuances
Replacement notes
Class A-R, $123.00 million: Three-month LIBOR + 1.16%
Class A-L, $100.00 million: Three-month LIBOR + 1.16%
Class B-R, $46.00 million: Three-month LIBOR + 1.70%
Class C-R, $21.30 million: Three-month LIBOR + 2.00%
Class D-R, $20.70 million: Three-month LIBOR + 3.00%
Class E-R, $13.00 million: Three-month LIBOR + 6.30%
Subordinated notes, $35.30 million: Not applicable
Original notes
Class A, $210.00 million: Three-month LIBOR + 2.05%
Class B, $51.00 million: Three-month LIBOR + 2.63%
Class C, $17.75 million: Three-month LIBOR + 3.54%
Class D, $20.00 million: Three-month LIBOR + 5.38%
Class E, $12.00 million: Three-month LIBOR + 7.81%
Class F, $6.50 million: Three-month LIBOR + 8.80%
Class I exchangeable secured notes, $80.55 million: Not
applicable
Class II exchangeable secured notes, $36.80 million: Not
applicable
Subordinated notes, $15.50 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
AIG CLO 2020-1 LLC
Class A-R, $123.00 million: AAA (sf)
Class A-L, $100.00 million: AAA (sf)
Class B-R, $46.00 million: AA (sf)
Class C-R, $21.30 million: A (sf)
Class D-R, $20.70 million: BBB- (sf)
Class E-R, $13.00 million: BB- (sf)
Subordinated notes, $35.30 million: Not rated
Ratings Withdrawn
AIG CLO 2020-1 LLC
Class A, $210.00 million: AAA (sf)
Class B, $51.00 million: AA (sf)
Class C, $17.75 million: A (sf)
Class D, $20.00 million: BBB- (sf)
Class E, $12.00 million: BB- (sf)
Class I exchangeable secured notes, $80.55 million: BBB-p (sf)
Class II exchangeable secured notes, $36.80 million: BB-p (sf)
AIR CANADA 2020-1C: S&P Lowers Class C Certs Rating to B+(sf)
-------------------------------------------------------------
S&P Global Ratings took rating actions on the issue-level ratings
of four Air Canada enhanced equipment trust certificates (EETCs)
following a review prompted by our publication of new criteria for
rating such. S&P also removed its "under criteria observation"
(UCO) indicator from the affected ratings.
S&P said, "Our analysis of equipment trust certificate (ETC) or
EETC ratings under the new criteria typically starts with our
issuer credit rating (ICR) on the airline that operates the
aircraft, and adds any applicable notches for the likelihood that
an airline will successfully reorganize in bankruptcy and continue
to make payments on the ETC or EETC (which we call "affirmation
credit"). We could adjust--by reducing those notches--for any
adverse legal considerations that might arise from the jurisdiction
in which the airline operates. For EETCs, we might also add notches
for the likelihood that repossession and sale of the aircraft
collateral will be sufficient to repay the EETC's principal and
accrued interest, avoiding a default, if the airline does not
reorganize or rejects the aircraft securing the certificates (which
we call "collateral credit")."
The rating actions on Air Canada's EETCs comprise three one-notch
downgrades and an upgrade as discussed below:
2013-1 Class A: S&P said, "The downgrade of Air Canada's 2013-1
Class A certificates to 'BB+(sf)' from 'BBB-(sf)' is primarily
driven by a provision in the new criteria that if our ICR on an
airline is 'B' or 'B+' (the ICR on Air Canada is 'B+') and there is
a difference of more than 10 percentage points between the
loan-to-value (LTV) calculated using appraised base value and a
higher (worse) LTV calculated using appraised current market value,
then we use an average of those two LTVs. We had previously focused
on LTV calculated mostly focusing on base value for these EETCs,
and the higher average LTV caused us to assign less collateral
credit for these EETCs. In addition, while the affirmation credit
afforded under the new criteria is higher than under the previous
criteria, we have used a comparative ratings analysis (CRA)
modifier to offset this benefit owing to our view of the
comparatively greater likelihood of rejection of the wide-body
aircraft-backed notes.
2015-2 Class AA: S&P said, "The downgrade of these certificates to
'A+(sf)' from 'AA-(sf)' is due to modifications in our approach to
assessing collateral credit for EETCs. Under the new criteria, the
defined ranges for collateral credit are different and more
prescriptive compared to the previous criteria. Also, the defined
LTV ranges for collateral credit are wider for high levels of
collateral credit, making it more difficult for the certificates to
attain the previous substantial level of rating uplift."
2020-1 Class C: S&P said, "We have downgraded these certificates to
'B+(sf)' from 'BB-(sf)' because our new criteria limit assigning
affirmation credit when the LTV is high (more than 80%), and in
particular for issues that do not have a liquidity facility and are
much more junior, as is the case for this issue. This is because of
the increased risk that an airline in bankruptcy would seek to
renegotiate payment terms with creditors with weak collateral
coverage. This limitation has caused us to remove the affirmation
credit we provided under our previous criteria."
2018-1 Class B: S&P said, "The one-notch upgrade to 'BBB+(sf)' from
'BBB(sf)' on the 2018-1 Class B certificates reflects a higher
collateral credit assessment given a more prescriptive guideline
under the new criteria. We note that our collateral credit
assessment for this Canadian-dollar obligation incorporates a LTV
that we have stressed for potential foreign exchange volatility
through maturity. Also, there is reduced uncertainty relating to
Boeing 737 MAX's future and return to service, which was a
constraining factor in our previous analysis."
Ratings List
AIR CANADA
Issuer Credit Rating B+/Negative--
ISSUE-LEVEL RATINGS LOWERED
TO FROM
Equipment Trust Certificates
Class C equip trust certs ser 2020-1C B+(sf) BB-(sf)
4.125% Class A equip trust certs ser 2013-1A BB+(sf) BBB-(sf)
3.75% Class AA equip trust certs ser 2015-2AA A+(sf) AA-(sf)
ISSUE-LEVEL RATINGS RAISED
TO FROM
Equipment Trust Certificates
4.19% Class B equip trust certs ser 2018-1B BBB+(sf) BBB(sf)
ALLEGRO CLO XIII: Moody's Assigns Ba3 Rating to Class E Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
debt issued by Allegro CLO XIII, Ltd. (the "Issuer" or "Allegro
XIII").
Moody's rating action is as follows:
US$3,500,000 Class X Senior Secured Floating Rate Notes due 2034,
Definitive Rating Assigned Aaa (sf)
US$220,000,000 Class A Senior Secured Floating Rate Notes due 2034,
Definitive Rating Assigned Aaa (sf)
US$100,000,000 Class A Loans due 2034, Definitive Rating Assigned
Aaa (sf)
US$60,000,000 Class B Senior Secured Floating Rate Notes due 2034,
Definitive Rating Assigned Aa2 (sf)
US$30,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned A3 (sf)
US$25,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Definitive Rating Assigned Baa3 (sf)
US$25,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Definitive Rating Assigned Ba3 (sf)
The notes and loans listed are referred to, collectively, as the
"Rated Debt."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Allegro XIII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 92.5% of the portfolio must consist of
senior secured loans and eligible investments, and up to 7.5% of
the portfolio may consist of second lien loans and unsecured loans.
The portfolio is approximately 95% ramped as of the closing date.
AXA Investment Managers, Inc. (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Debt, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2851
Weighted Average Spread (WAS): 3.35%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9 years
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of corporate assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Debt.
AMERICAN AIRLINES 2013-1: S&P Lowers Rating on 4 Classes to B
-------------------------------------------------------------
S&P Global Ratings lowered its issue-level ratings on 14 American
Airlines Inc. enhanced equipment trust certificates (EETCs)
following a review prompted by our publication of new criteria for
rating such issues. S&P removed its "under criteria observation"
(UCO) indicator from the affected ratings.
S&P said, "Our analysis of equipment trust certificate (ETC) or
EETC ratings under the new criteria typically starts with our
issuer credit rating (ICR) on the airline that operates the
aircraft. It adds any applicable notches for the likelihood that an
airline will successfully reorganize in bankruptcy and continue to
make payments on the ETC or EETC (which we call "affirmation
credit"). We may adjust--by reducing those notches--for any adverse
legal considerations that may arise from the jurisdiction in which
the airline operates. For EETCs, we may also add notches for the
likelihood that repossession and sale of the aircraft collateral
will be sufficient to repay principal and accrued interest,
avoiding a default, if the airline does not reorganize or rejects
the aircraft securing the certificates (which we call "collateral
credit").
"We attribute the rating actions on American EETCs, all one-notch
downgrades, principally to two causes. First, the new criteria
specify that, for airlines with an ICR of 'B-' or below (we rate
American 'B-'), we use appraised current market values (CMV),
rather than appraised base values or a combination of the two, in
calculating loan-to-value (LTV) that helps determine collateral
credit. While we considered CMVs in applying the previous criteria,
we did not focus exclusively on CMVs based on a rating on an
airline. With the global airline industry and aircraft values
depressed, this leads to high (weaker) LTVs and sometimes lower
collateral credit.
"Secondly, the new criteria set specific guidelines for when the
LTV on a particular EETC is sufficiently high that we will limit
the affirmation credit we assign (in addition to its effect on
collateral credit). This is because we believe very high LTVs could
prompt a bankrupt airline to seek to negotiate reduced payments,
and that holders of the certificates might agree if aircraft resale
market conditions are particularly weak and repossession and sale
thus appears an unattractive option. These limitations in some
cases caused us to assign lower affirmation credit than we did
under the previous criteria."
Ratings List
AMERICAN AIRLINES INC.
Issuer credit rating B-/Negative
RATINGS LOWERED
Enhanced Equipment Trust Certificates
TO FROM
4.00% 2013-1 Class A certs B(sf) B+(sf)
3.70% 2014-1 Class A certs BB(sf) BB+(sf)
4.38% 2014-1 Class B certs B(sf) B+(sf)
3.70% 2015-1 Class B certs B(sf) B+(sf)
3.60% 2015-2 Class AA certs A-(sf) A(sf)
4.00% 2015-2 Class A certs BB(sf) BB+(sf)
3.58% 2016-1 Class AA certs A-(sf) A(sf)
4.10% 2016-1 Class A certs BB(sf) BB+(sf)
3.20% 2016-2 Class AA certs A-(sf) A(sf)
3.65% 2016-2 Class A certs BB(sf) BB+(sf)
3.00% 2016-3 Class AA certs A(sf) A+(sf)
3.25% 2016-3 Class A certs BB+(sf) BBB-(sf)
3.75% 2016-3 Class B certs B(sf) B+(sf)
3.15% 2019-1 Class AA certs A-(sf) A(sf)
AMSR 2021-SFR2: DBRS Gives Prov. BB(low) Rating to Class F-2 Certs
------------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Single-Family Rental Pass-Through Certificates to be issued by AMSR
2021-SFR2 Trust (AMSR 2021-SFR2):
-- $168.8 million Class A at AAA (sf)
-- $53.6 million Class B at AA (low) (sf)
-- $23.3 million Class C at A (low) (sf)
-- $24.5 million Class D at BBB (high) (sf)
-- $22.1 million Class E-1 at BBB (sf)
-- $30.0 million Class E-2 at BBB (low) (sf)
-- $36.1 million Class F-1 at BB (high) (sf)
-- $27.9 million Class F-2 at BB (low) (sf)
The AAA (sf) rating on the Class A Certificates reflects 58.2% of
credit enhancement provided by subordinated notes in the pool. The
AA (low) (sf), A (low) (sf), BBB (high) (sf), BBB (sf), BBB (low)
(sf), BB (high) (sf), and BB (low) (sf) ratings reflect 45.0%,
39.2%, 33.1%, 27.7%, 22.5% 13.5%, and 6.6% credit enhancement,
respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
The AMSR 2021-SFR2 certificates are supported by the income streams
and values from 1,779 rental properties. The properties are
distributed across 14 states and 37 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 value, 64.9% of the
portfolio is concentrated in three states: Florida (36.8%), Georgia
(15.9%), and North Carolina (12.2%). The average value is $261,804.
The average age of the properties is roughly 23 years. The majority
of the properties have three or more bedrooms. The certificates
represent a beneficial ownership in an approximately five-year,
fixed-rate, interest-only loan with an initial aggregate principal
balance of approximately $465.7 million.
DBRS Morningstar assigned the provisional ratings for 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 flows (NCFs) by evaluating the gross rent,
concession, vacancy, operating expenses, and capital expenditure
(capex) data. The DBRS Morningstar NCF analysis resulted in a
minimum debt service coverage ratio of higher than 1.0 times (x).
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.
Notes: All figures are in U.S. dollars unless otherwise noted.
ANCHORAGE CAPITAL 17: Moody's Assigns Ba3 Rating to Class E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Anchorage Capital CLO 17, Ltd. (the "Issuer" or
"Anchorage Capital CLO 17").
Moody's rating action is as follows:
US$270,000,000 Class A-1 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$9,000,000 Class A-2 Senior Secured Floating Rate Notes due 2034,
Assigned Aaa (sf)
US$51,750,000 Class B Senior Secured Floating Rate Notes due 2034,
Assigned Aa2 (sf)
US$25,312,500 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$31,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$26,437,500 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes listed are referred to, collectively, as the "Rated
Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Anchorage Capital CLO 17 is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 92.5% of the portfolio must
consist of first lien senior secured loans, cash, and eligible
investments, and up to 7.5% of the portfolio may consist of second
lien loans, unsecured loans and permitted non-loan assets. The
portfolio is approximately 75% ramped as of the closing date.
Anchorage Capital Group, L.L.C. (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five-year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $450,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3200
Weighted Average Spread (WAS): 3.75%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 9 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
ANGEL OAK 2021-3: Fitch Assigns B(EXP) Rating on Class B-2 Debt
---------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Angel Oak Mortgage
Trust 2021-3 (AOMT 2021-3)
DEBT RATING
---- ------
AOMT 2021-3
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB-(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch Ratings expects to rate the residential mortgage-backed
certificates to be issued by Angel Oak Mortgage Trust 2021-3,
Mortgage-Backed Certificates, Series 2021-3 (AOMT 2021-3) as
indicated above. The certificates are supported by 602 loans with a
balance of $302.58 million as of the cutoff date. This will be the
15th Fitch-rated AOMT transaction.
The certificates are secured by mortgage loans that were originated
by Angel Oak Home Loans LLC and Angel Oak Mortgage Solutions LLC
(referred to as Angel Oak originators). Of the loans in the pool,
89.1% are designated as nonqualified mortgage (Non-QM), and 10.9%
are investment properties not subject to Ability to Repay (ATR)
Rule. No loans are designated as QM in the pool.
There is LIBOR exposure in this transaction. 1.0% of the pool
comprises adjustable-rate mortgage (ARMs) loans that reference
1-year Libor. The offered certificates are fixed rate and capped at
the net weighted average coupon (WAC).
KEY RATING DRIVERS
Non-QM Credit Quality (Mixed): The collateral consists of 602
loans, totaling $303 million, and seasoned approximately seven
months in aggregate. The borrowers have a strong credit profile
(736 FICO and 34.0% DTI) and relatively high leverage with an
original CLTV of 75.4% that translates to a Fitch calculated sLTV
of 84%. Of the pool, 84.0% consists of loans where the borrower
maintains a primary residence, while 16.0% comprises an investor
property or second home; 12.7% of the loans were originated through
a retail channel. Additionally, 89.1% are designated as non-QM,
while the remaining 10.9% are exempt from QM since they are
investor loans.
The pool contains 65 loans over $1 million, with the largest $2.6
million.
10.9% of the pool comprises loans on investor properties (4.8%
underwritten to the borrowers' credit profile and 6.1% comprising
investor cash flow loans). None of the borrowers have subordinate
financing, there are no second lien loans, and 1.3% of borrowers
were viewed by Fitch as having a prior credit event in the past
seven years.
21 loans in the pool had a deferred balance, which was treated by
Fitch as a second lien and the CLTV for that loan was increased to
account for the amount still owed on the loan.
27% of the loans are located in Florida and 23% in California. The
top three MSAs account for approximately 35% of the pool. The
largest MSA is Miami at 15.5% followed by Atlanta at 11.2%.
Although the credit quality of the borrowers is higher than prior
AOMT transactions, the pool characteristics resemble non-prime
collateral, and therefore, the pool was analyzed using Fitch's
non-prime model.
Loan Documentation (Negative): Approximately 93.3% of the pool was
underwritten to borrowers with less than full documentation. Of
this amount, 87.0% was underwritten to a 12- or 24-month bank
statement program for verifying income, which is not consistent
with Appendix Q standards and Fitch's view of a full documentation
program. To reflect the additional risk, Fitch increases the PD by
1.5x on the bank statement loans. Besides loans underwritten to a
bank statement program, 0.2% is an asset depletion product, and
6.1% is a debt service coverage ratio product. The pool does not
have any loans underwritten to a CPA or PnL product, which Fitch
viewed as a positive.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent principal and interest. The
limited advancing reduces loss severities as there is a lower
amount repaid to the servicer when a loan liquidates and
liquidation proceeds are prioritized to cover principal repayment
over accrued but unpaid interest. The downside to this is the
additional stress on the structure side as there is limited
liquidity in the event of large and extended delinquencies
Modified Sequential Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A notes
while excluding the subordinate bonds from principal until all
three classes are reduced to zero. To the extent that either a
cumulative loss trigger event or delinquency trigger event occurs
in a given period, principal will be distributed sequentially to
the class A-1, A-2 and A-3 bonds until they are reduced to zero.
Macro or Sector Risks (Positive): Consistent with the Additional
Scenario Analysis section of Fitch's "U.S. RMBS Coronavirus-Related
Analytical Assumptions" criteria, Fitch will consider applying
additional scenario analysis based on stressed assumptions as
described in the section to remain consistent with significant
revisions to Fitch's macroeconomic baseline scenario or if actual
performance data indicate the current assumptions require
reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data, and the unexpected
development in the health crisis arising from the advancement and
availability of coronavirus vaccines, Fitch reconsidered the
application of the coronavirus-related Economic Risk Factors (ERF)
floors of 2.0 and used ERF floors of 1.5 and 1.0 for the 'BBsf' and
'Bsf' rating stresses, respectively.
Fitch's "Global Economic Outlook - June 2021" and related base-line
economic scenario forecasts have been revised to 6.8% U.S. GDP
growth for 2021 and 3.9% for 2022 following a 3.5% GDP decline in
2020. Additionally, Fitch's U.S. unemployment forecasts for 2021
and 2022 are 5.6% and 4.5%, respectively, which is down from 8.1%
in 2020. These revised forecasts support Fitch reverting to the 1.5
and 1.0 ERF floors described in Fitch's "U.S. RMBS Loan Loss Model
Criteria."
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
Factor that could, individually or collectively, lead to a positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
Factor that could, individually or collectively, lead to a negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 41.9% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Infinity, and Consolidated Analytics. The
third-party due diligence described in Form 15E focused on three
areas: compliance review, credit review, and valuation review.
Fitch considered this information in its analysis and, as a result,
Fitch did not make any adjustment(s) to its analysis due to the due
diligence findings. Based on the results of the 100% due diligence
performed on the pool, the overall expected loss was reduced by
0.52%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the loans. The third-party due diligence was
consistent with Fitch's "U.S. RMBS Rating Criteria." The sponsor,
Angel Oak Real Estate Investment Trust II, engaged American
Mortgage Consultants, Inc., Consolidated Analytics, Inc. and
Infinity IPS to perform the review. Loans reviewed under these
engagements were given compliance, credit and valuation grades and
assigned initial grades for each subcategory.
An exception and waiver report was provided to Fitch, indicating
the pool of reviewed loans has a number of exceptions and waivers.
Fitch determined that the exceptions and waivers do not materially
affect the overall credit risk of the loans due to the presence of
compensating factors such as having liquid reserves or FICO above
guideline requirements or LTV or DTI lower than guideline
requirement. Therefore, no adjustments were needed to compensate
for these occurrences.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's (ASF) data layout format. The ASF data tape
layout was established with input from various industry
participants, including rating agencies, issuers, originators,
investors and others, to produce an industry standard for the
pool-level data in support of the U.S. RMBS securitization market.
The data contained in the data tape layout were populated by the
due diligence company and no material discrepancies were noted.
ESG CONSIDERATIONS
AOMT 2021-3 has an ESG Relevance Score of '4+' for Transaction
Parties & Operational Risk due to strong transaction due diligence
and a 'RPS1-' Fitch-rated servicer, which resulted in a reduction
in expected losses, and is relevant to the rating in conjunction
with other factors.
The issuer indicated that all the loans in the pool fit into an ESG
category mainly due to the fact that they improve access to capital
market liquidity to underserved borrowers. 88% of the loans are
made to borrowers with non-standard income and are to first time
home buyers, buyers in economic opportunity zones or are
categorized as affordable housing, 11% are in opportunity zones and
the remainder are first time homebuyers. Fitch did not take these
ESG programs into consideration when assigning Fitch's ESG score of
'4+' and did not take it into consideration in the analysis of the
transaction.
For this transaction, Angel Oak Capital Advisors (AOCAS) received a
secondary party opinion of its Social Bonds linked to its
sustainability strategy. Fitch reviewed the secondary party opinion
and concluded that the report's assessment has no additional impact
to the relevance or materiality factors considered in assigning
Fitch's ESG Relevance Scores (ESG.RS). In addition, it had no
impact on Fitch's rating analysis.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
APEX CREDIT 2021: S&P Assigns BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Apex Credit CLO 2021
Ltd./Apex Credit CLO 2021 LLC's floating- and fixed-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Apex Credit CLO 2021 Ltd./Apex Credit CLO 2021 LLC
Class A-N, $199.0 million: AAA (sf)
Class A-F, $25.0 million: AAA (sf)
Class B, $41.9 million: AA (sf)
Class C (deferrable), $21.0 million: A (sf)
Class D-1 (deferrable), $17.5 million: BBB+ (sf)
Class D-2 (deferrable), $3.5 million: BBB- (sf)
Class D-3 (deferrable), $2.0 million: BBB- (sf)
Class E (deferrable), $12.0 million: BB- (sf)
Subordinated notes, $37.0 million: Not rated
ARROYO MORTGAGE 2021-1R: DBRS Gives Prov. B Rating on B-2 Notes
---------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following
Mortgage-Backed Notes, Series 2021-1R to be issued by Arroyo
Mortgage Trust 2021-1R:
-- $342.9 million Class A-1 at AAA (sf)
-- $27.6 million Class A-2 at AA (sf)
-- $20.9 million Class A-3 at A (sf)
-- $11.4 million Class M-1 at BBB (sf)
-- $1.8 million Class B-1 at BB (sf)
-- $812.0 thousand Class B-2 at B (sf)
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The AAA (sf) rating on the Class A-1 Notes reflects 15.60% of
credit enhancement provided by subordinate notes. The AA (sf), A
(sf), BBB (low) (sf), BB (sf), and B (sf) ratings reflect 8.80%,
3.65%, 0.85%, 0.40%, and 0.20% of credit enhancement,
respectively.
This is a securitization of a portfolio of seasoned fixed- and
adjustable-rate, expanded prime and nonprime, first-lien
residential mortgages funded by the issuance of the Mortgage-Backed
Notes, Series 2021-1R. The Notes are backed by 1,234 mortgage loans
with a total principal balance of $406,285,237 as of the Cut-Off
Date (June 1, 2021).
The mortgage pool consists primarily of loans (95.0% of the total
aggregated balance) from a previously issued and collapsed Non-QM
Arroyo transaction. The remaining 5.0% of the pool are from two
other New York common law trusts.
The loans are on average, more seasoned than a typical new
origination non-Qualified Mortgage (non-QM) securitization. The
DBRS Morningstar calculated weighted-average (WA) loan age is 61
months, and all of the loans are seasoned 24 months or more. Within
the pool, 98.3% of the loans are current, 1.5% are 30 days
delinquent, and 0.1% are 60 days or more delinquent. (All loans 60
days or more delinquent are part of an active forbearance plan.)
The Coronavirus Disease (COVID-19)-affected loans account for 21.4%
of the pool and are described in further detail below.
The originators for the mortgage pool are AmWest Funding Corp.
(Amwest; 40.8%), Metro City Bank (MCB; 25.9%), East West Bank
(25.8%), and other originators that each comprise less than 10.0%
of the mortgage loans. The servicers of the loans are AmWest
(40.8%), MCB (25.9%), East West Bank (25.8%), and other servicers
that each comprise less than 10.0% of the mortgage loans.
Although the mortgage loans were originated to satisfy the Consumer
Financial Protection Bureau's Ability-to-Repay (ATR) rules, they
were made to borrowers who generally do not qualify for agency,
government, or private-label nonagency prime jumbo products for
various reasons. In accordance with the Qualified Mortgage (QM)/ATR
rules, 79.8% of the loans are designated as non-QM. Approximately
20.2% of the loans are made to investors for business purposes and,
hence, are not subject to the QM/ATR rules.
The sponsor, directly or indirectly through a majority-owned
affiliate, will retain an eligible horizontal residual interest
consisting of the Class B-3, Class XS, and Class A-IO-S Notes, to
satisfy the credit risk-retention requirements under Section 15G of
the Securities Exchange Act of 1934 and the regulations promulgated
thereunder.
The Seller will have the option, but not the obligation, to
repurchase any mortgage loan that becomes 90 or more days
delinquent under the Mortgage Bankers Association method at the a
price equal to the stated principal balance of the loan plus
accrued interested and any advanced amounts, provided that the
total repurchases may not exceed 10% of the aggregate stated
principal balance as of the Cut-Off Date.
On or after the earlier of (1) the three year anniversary of the
Closing Date or (2) the date when the aggregate stated principal
balance of the mortgage loans is reduced to 30% of the Cut-Off Date
balance, the Administrator, at the Issuer's option, may redeem all
of the outstanding Notes at a price equal to the greater of (a) the
class balances of the related Notes plus accrued and unpaid
interest, including any cap carryover amounts, unreimbursed fee and
expenses, and preclosing deferred and forbearance amounts, and (b)
the aggregate stated principal balance of the mortgage loans plus
accrued and unpaid interest, the fair value of any
real-estate-owned property, unreimbursed advances and fees, and
preclosing deferred and forbearance amounts. After such purchase,
the Issuer must complete a qualified liquidation, which requires
(1) a complete liquidation of assets within the Trust and (2)
proceeds to be distributed to the appropriate holders of regular or
residual interests.
The Servicers will fund advances of delinquent principal and
interest (P&I) on any mortgage until such loan becomes 180 days
delinquent. The Servicers are obligated to make advances in respect
of taxes, insurance premiums, and reasonable costs incurred in the
course of servicing and disposing properties. The six-month
advancing mechanism may increase the probability of periodic
interest shortfalls in the current economic environment affected by
the Coronavirus Disease (COVID-19) pandemic.
This transaction incorporates a sequential-pay cash flow structure
with a pro rata feature among the senior tranches. Principal
proceeds can be used to cover interest shortfalls on the Class A-1
and A-2 Notes sequentially (IPIP) after a Trigger Event. For more
subordinated Notes, principal proceeds can be used to cover
interest shortfalls as the more senior Notes are paid in full.
Furthermore, excess spread can be used to cover realized losses and
prior period bond writedown amounts first before being allocated to
unpaid cap carryover amounts to Class A-1 down to the Class B-1
Notes.
CORONAVIRUS IMPACT
The coronavirus pandemic and the resulting isolation measures have
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. Shortly after the onset of the pandemic, DBRS
Morningstar saw an increase in the delinquencies for many
residential mortgage-backed securities (RMBS) asset classes.
Such mortgage delinquencies were mostly in the form of
forbearances, which are generally short-term periods of payment
relief, that may perform differently from traditional
delinquencies. At the onset of the pandemic, the option to forebear
mortgage payments was widely available, driving forbearances to an
elevated level. When the dust settled, loans with
coronavirus-induced forbearance in 2020 performed better than
expected, thanks to government aid, low loan-to-value ratios, and
acceptable underwriting in the mortgage market in general. Across
nearly all RMBS asset classes in recent months delinquencies have
been gradually trending downwards, as forbearance periods come to
an end for many borrowers.
Notes: All figures are in U.S. dollars unless otherwise noted.
ARROYO MORTGAGE 2021-1R: S&P Assigns Prelim B Rating on B-2 Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Arroyo
Mortgage Trust 2021-1R's mortgage-backed notes.
The note issuance is an RMBS securitization backed by seasoned,
first-lien, fixed- and adjustable-rate, fully amortizing
residential mortgage loans to both prime and nonprime borrowers
(some with interest-only periods) secured by single-family
residential properties, planned-unit developments, condominiums,
and two- to four-family residential properties. The majority of the
loans are non-qualified mortgage loans.
The preliminary ratings are based on information as of June 24,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty framework;
-- The geographic concentration;
-- The mortgage aggregator, Western Asset Management Co. LLC
(Western Asset) as investment manager for Western Asset Opportunity
Fund L.P.; and
-- The impact that the economic stress brought on by the COVID-19
virus is likely to have on the performance of the mortgage
borrowers in the pool and liquidity available in the transaction.
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Preliminary Ratings Assigned
Arroyo Mortgage Trust 2021-1R(i)
Class A-1, $342,904,000: AAA (sf)
Class A-2, $27,628,000 AA+ (sf)
Class A-3, $20,923,000: AA (sf)
Class M-1, $11,376,000: BBB (sf)
Class B-1, $1,829,000: BB (sf)
Class B-2, $812,000: B (sf)
Class B-3, $813,236: not rated
Class A-IO-S, Notional(ii): Not rated
Class XS, Notional(ii): Not rated
Class R, N/A: Not rated
(i)The preliminary ratings assigned to the classes address the
ultimate payment of interest and principal.
(ii)Notional amount will equal the aggregate stated principal
balance of the mortgage loans as of the first day of the related
due period.
N/A--Not applicable.
BALBOA BAY 2021-1: S&P Assigns BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Balboa Bay Loan Funding
2021-1 Ltd./Balboa Bay Loan Funding 2021-1 LLC's floating-rate
notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Balboa Bay Loan Funding 2021-1 Ltd./Balboa Bay Loan Funding
2021-1 LLC
Class A, $244.0 million: AAA (sf)
Class B, $60.0 million: AA (sf)
Class C (deferrable), $24.0 million: A (sf)
Class D (deferrable), $24.0 million: BBB- (sf)
Class E (deferrable), $12.0 million: BB- (sf)
Subordinated notes, $39.7 million: Not rated
BATTALION CLO VII: Moody's Hikes $4MM Class E-RR Notes to B1
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Battalion CLO VII Ltd. (the "CLO" or "Issuer"):
US$19,000,000 Class B-RR Senior Secured Deferrable Floating Rate
Notes Due July 17, 2028 (the "Class B-RR Notes"), Upgraded to Aa1
(sf); previously on December 28, 2020 Upgraded to Aa3 (sf)
US$24,000,000 Class C-RR Senior Secured Deferrable Floating Rate
Notes Due July 17, 2028 (the "Class C-RR Notes"), Upgraded to A3
(sf); previously on December 28, 2020 Upgraded to Baa2 (sf)
US$21,000,000 Class D-RR Secured Deferrable Floating Rate Notes Due
July 17, 2028 (the "Class D-RR Notes"), Upgraded to Ba2 (sf);
previously on September 4, 2020 Confirmed at Ba3 (sf)
US$4,000,000 Class E-RR Secured Deferrable Floating Rate Notes Due
July 17, 2028 (the "Class E-RR Notes"), Upgraded to B1 (sf);
previously on September 4, 2020 Confirmed at B3 (sf)
The Class B-RR Notes, C-RR Notes, D-RR Notes, and E-RR Notes are
referred to herein, collectively, as the "Upgraded Notes".
The CLO, originally issued in November 2014, partially refinanced
in April 2017, and refinanced in full in July 2018, is a managed
cashflow CLO. The notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in July 2020.
RATINGS RATIONALE
The upgrade actios taken on the Upgraded Notes are primarily a
result of deleveraging of the senior notes and an increase in the
transaction's over-collateralization (OC) ratios since December
2020. The Class A-1-RR notes have been paid down by approximately
37% or $96.4 million since then. Based on the trustee's June 2021
report[1], the OC ratios for the Class A, Class B, Class C, and
Class D Overcollateralization Tests are reported at 149.68%,
135.73%, 121.43%, and 111.18%, respectively, versus December 2020
reported[2] levels of 131.82%, 123.47%, 114.33%, and 107.38%,
respectively.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $280,285,111
Defaulted par: $1,940,000
Diversity Score: 46
Weighted Average Rating Factor (WARF): 3038
Weighted Average Spread (WAS) (before accounting for LIBOR floors):
3.73%
Weighted Average Recovery Rate (WARR): 47.97%
Weighted Average Life (WAL): 3.75 years
In consideration of the current high uncertainties around the
global economy, and the ultimate performance of the CLO portfolio,
Moody's conducted a number of additional sensitivity analyses
representing a range of outcomes that could diverge, both to the
downside and the upside, from Moody's base case. Some of the
additional scenarios that Moody's considered in its analysis of the
transaction include, among others: additional near-term defaults of
companies facing liquidity pressure; sensitivity analysis on
deteriorating credit quality due to a large exposure to loans with
negative outlook, and a lower recovery rate assumption on defaulted
assets to reflect declining loan recovery rate expectations.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
BENCHMARK 2019-B12 MORTGAGE: Fitch Rates Class G-RR Certs 'B-'
--------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of Benchmark 2019-B12
Mortgage Trust commercial mortgage pass-through certificates,
Series 2019-B12. Fitch has also revised the Rating Outlooks on
classes F-RR and G-RR to Negative from Stable.
DEBT RATING PRIOR
---- ------ -----
Benchmark 2019-B12
A-1 08162FAA1 LT AAAsf Affirmed AAAsf
A-2 08162FAB9 LT AAAsf Affirmed AAAsf
A-3 08162FAC7 LT AAAsf Affirmed AAAsf
A-4 08162FAD5 LT AAAsf Affirmed AAAsf
A-5 08162FAF0 LT AAAsf Affirmed AAAsf
A-AB 08162FAE3 LT AAAsf Affirmed AAAsf
A-S 08162FAG8 LT AAAsf Affirmed AAAsf
B 08162FAH6 LT AA-sf Affirmed AA-sf
C 08162FAJ2 LT A-sf Affirmed A-sf
D 08162FAN3 LT BBBsf Affirmed BBBsf
E 08162FAP8 LT BBB-sf Affirmed BBB-sf
F-RR 08162FAQ6 LT BB-sf Affirmed BB-sf
G-RR 08162FAR4 LT B-sf Affirmed B-sf
X-A 08162FAK9 LT AAAsf Affirmed AAAsf
X-B 08162FAL7 LT A-sf Affirmed A-sf
X-D 08162FAM5 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Increased Loss Expectations: Loss expectations increased since
issuance due to the transfer of two loans (1.5%) to special
servicing and higher expected losses on loans following the loss of
tenants. Fitch flagged nine loans (16.6%) as Fitch Loans of Concern
(FLOCs) including the two loans in special and one loan within the
top 15 (5.5%) primarily due to deteriorating performance or
concerns related to the coronavirus pandemic.
Fitch's current ratings incorporate a base case loss of 4.1%. The
Negative Outlooks reflect losses that could reach 4.7% when
factoring additional pandemic-related stresses.
Fitch Loans of Concern: The largest contributor to loss, Oakbrook
Terrace (1.6%), is secured by a 232,052 -sf office property located
in Oakbrook Terrace, IL. The loan was flagged as a FLOC as
occupancy declined to 69.4% as of March 2021 from 74% at YE 2020.
Based on annualized 2021 NOI ($1.1 million) vs. $2 million at YE
2020, Fitch's expected losses (34.3%) are higher than issuance
(3.2%).
The second largest contributor to loss, The Zappettini Portfolio
(5.5%), is secured by portfolio of 10 office buildings (251,575 sf)
all located in Mountain View, CA. The portfolio is located near the
Googleplex and Microsoft's Silicon Valley campus. The top three
tenants are Index Corporation (14.8%; lease expires June 2022),
Egnyte, Inc. (11.8%; lease expires April 2024) and County of Santa
Clara (9.9%; lease expires Sept. 30, 2021). Fitch flagged the loan
as a FLOC as occupancy declined to 88.7% as of April 2021 from 100%
at YE 2020 and upcoming lease rollover risk. Approximately 22.4%
NRA and 21.9% NRA expires in 2021 and 2022 respectively. Fitch
requested a leasing status update but did not receive a response.
Fitch's analysis includes a 20% stress to YE 2020 NOI to account
for the decline in occupancy and upcoming rollover concerns, which
resulted in an 8.6% loss severity (LS).
The third largest contributor to loss, Montalvo Square (4.7%), is
secured by a 218,000-sf anchored retail center located in Ventura,
CA, 30 miles north of LA. The largest tenants include Ralph's
Grocery (26.6% NRA; lease expires June 2032), LA Fitness (21.2%
NRA; lease expires June 2027), and CVS (10.6% NRA; lease expires
February 2023). Fitch's analysis did not apply an additional stress
to YE 2020 NOI, which resulted in an 8.8% LS.
Minimal Change in Credit Enhancement: As of the June 2021
distribution date, the pool's aggregate principal balance has paid
down by 0.4% to $1,424.2 million from $$1,429.3 million at
issuance. No loans are defeased. Twenty-nine loans, representing
80.8% of the pool, are full-term interest-only. Eleven loans,
representing 9.1% of the pool, were structured with a partial
interest-only component; one loan (1.2%) has begun to amortize.
Based on the scheduled balance at maturity, the pool will pay down
by only 3.8%.
Coronavirus Exposure: Retail, multifamily and hotel properties
represent 36.3%, 15.6% and 5% of the pool, respectively. Fitch's
analysis applied additional coronavirus-related stresses on four
hotel loans (4.4%) to account for potential cash flow disruptions.
Pool Concentrations: Retail properties represent the largest asset
concentration at 36%. Office (26.4%) and multifamily (15.6%)
represent the second and third largest asset types respectively.
Pari Passu: Fifteen loans (58.7% of pool) are pari passu, including
10 loans (49.5%) in the top 15.
Credit Opinion Loans: Nine loans (39% of the pool) had
investment-grade credit opinions at issuance.
RATING SENSITIVITIES
The Stable Outlooks on classes reflect the overall stable
performance of the majority of the pool and expected continued
amortization. The Negative Outlooks reflect concerns over the FLOCs
as well as the unknown impact of the pandemic on the overall pool.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, particularly on the
FLOCs, coupled with paydown and/or defeasance.
-- Upgrades to the 'A-sf' and 'AA-sf' rated classes would likely
occur with significant improvement in credit enhancement (CE)
and/or defeasance; however, adverse selection and increased
concentrations, or underperformance of the FLOCs, could cause
this trend to reverse.
-- Upgrades to the 'BBBsf' and below-rated classes are considered
unlikely and would be limited based on sensitivity to
concentrations or the potential for future concentrations.
Classes would not be upgraded above 'Asf' if there is a
likelihood of interest shortfalls. Additionally, an upgrade to
the 'BB-sf' and 'B-sf' rated classes is not likely until later
years of the transaction and only if the performance of the
remaining pool is stable and/or there is sufficient CE, which
would likely occur when the nonrated class is not eroded and
the senior classes pay off.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool-level losses from underperforming or
specially serviced loans.
-- Downgrades to the 'AA-sf' through 'AAAsf' rated-classes are
not considered likely due to their position in the capital
structure but may occur should interest shortfalls affect
these classes.
-- Downgrades to the 'BBB-sf' through 'A-sf' rated classes may
occur should expected losses for the pool increase
substantially and all of the loans susceptible to the
coronavirus pandemic suffer losses, which would erode credit
enhancement.
-- Downgrades to the 'B-sf' and 'BB-sf' rated classes would occur
with greater certainty of loss or as losses are realized.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
BENCHMARK 2021-B27: Fitch Assigns B- Rating on J-RR Certs
---------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Benchmark 2021-B27 Mortgage Trust commercial mortgage pass-through
certificates, series B27 as follows:
-- $18,655,000 class A-1 'AAAsf'; Outlook Stable;
-- $37,990,000 class A-2 'AAAsf'; Outlook Stable;
-- $83,071,000 class A-3 'AAAsf'; Outlook Stable;
-- $175,000,000a class A-4 'AAAsf'; Outlook Stable;
-- $396,379,000a class A-5 'AAAsf'; Outlook Stable;
-- $26,294,000 class A-AB 'AAAsf'; Outlook Stable;
-- $808,494,000b class X-A 'AAAsf'; Outlook Stable;
-- $71,105,000 class A-S 'AAAsf'; Outlook Stable;
-- $42,136,000 class B 'AA-sf'; Outlook Stable;
-- $48,721,000 class C 'A-sf'; Outlook Stable;
-- $90,857,000bc class X-B 'A-sf'; Outlook Stable;
-- $64,521,000bc class X-D 'BBB-sf'; Outlook Stable;
-- $15,802,000bc class X-F 'BB+sf'; Outlook Stable;
-- $14,484,000bc class X-G 'BB-sf'; Outlook Stable.
-- $35,553,000c class D 'BBBsf'; Outlook Stable;
-- $28,968,000c class E 'BBB-sf'; Outlook Stable;
-- $15,802,000c class F 'BB+sf'; Outlook Stable;
-- $14,484,000c class G 'BB-sf'; Outlook Stable;
-- $11,851,000ce class J-RR 'B-sf'; Outlook Stable.
The following classes are not expected to be rated by Fitch:
-- $47,403,985ce class K-RR;
-- $40,500,000cd VRR Interest.
(a) Since Fitch published its expected ratings on June 14, 2021,
the balances for classes A-4 and A-5 were finalized. At the time
the expected ratings were published, the initial certificate
balances of classes A-4 and A-5 were expected to be $571,379,000 in
the aggregate, subject to a 5% variance. The final class balances
for classes A-4 and A-5 are $175,000,000 and $396,379,000,
respectively. The classes above reflect the final ratings and deal
structure.
(b) Notional amount and interest only (IO).
(c) Privately placed and pursuant to Rule 144A.
(d) Non-offered vertical credit risk retention interest.
(e) Horizontal risk retention interest.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 47 fixed-rate loans secured by
170 commercial properties having an aggregate principal balance of
$1,093,912,985 as of the cut-off date. The loans were contributed
to the trust by Citi Real Estate Funding Inc., JPMorgan Chase Bank,
National Association, Goldman Sachs Mortgage Company, and German
American Capital Corporation.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 22.9% of the properties
by balance, cash flow analyses of 85.3% of the pool, and asset
summary reviews on 100% of the pool.
Coronavirus-Related Effects: The ongoing containment effort related
to the coronavirus pandemic may have an adverse impact on near-term
revenue (i.e. bad debt expense, rent relief) and operating expenses
(i.e. sanitation costs) for some properties in the pool.
Delinquencies may occur in the coming months as forbearance
programs are put in place, although the ultimate effects on credit
losses will depend heavily on the severity and duration of the
negative economic impact of the coronavirus pandemic and to what
degree fiscal interventions by the U.S. federal government can
mitigate the outcomes on consumers.
Per the offering documents, all the loans are current and are not
subject to any ongoing forbearance requests; however, the sponsors
for Alabama Hilton Portfolio (1.5% of the pool) have negotiated a
loan amendment/modification.
KEY RATING DRIVERS
Higher Fitch Leverage: The transaction's Fitch leverage is higher
than other recent U.S. multiborrower transactions rated by Fitch.
The pool's Fitch loan-to-value ratio (LTV) of 105.6% is higher than
the 2020 average of 99.6% and the YTD 2021 average of 101.6%.
Additionally, the pool's Fitch trust debt service coverage ratio
(DSCR) of 1.25x is lower than the 2020 and YTD 2021 averages of
1.32x and 1.39x, respectively. Excluding credit opinion loans, the
pool's weighted average (WA) Fitch trust DSCR of 1.25x is below the
YTD 2021 average of 1.29x and above the 2020 average of 1.24x.
Excluding credit opinion loans, the pool's weighted average (WA)
Fitch trust LTV of 113.2% is above the YTD 2021 and 2020 averages
of 109.8% and 111.3%, respectively.
Investment-Grade Credit Opinion Loans: The pool includes three
loans, representing 18.6% of the pool, that received
investment-grade credit opinions. This is lower than the 2020
average of 24.5% and above the YTD 2021 average of 15.0%.
Burlingame Point (7.7% of the pool) received a credit opinion of
'BBB-sf' on a standalone basis, Equus Industrial Portfolio (6.2% of
the pool) received a credit opinion of 'BBB-sf' on a standalone
basis, and Amazon Seattle (4.7%) received a credit opinion of
'BBB-sf' on a standalone basis.
Limited Amortization: The pool has a scheduled principal paydown of
only 4.4% by maturity. The expected paydown is lower than the 2020
average of 5.3% and lower than the YTD 2021 average of 4.5%. Thirty
loans, representing 75.0% of the pool's cutoff balance, are
interest only for the entirety of their respective loan terms. This
concentration of full-term IO loans is greater than the 2020 and
YTD 2021 averages of 67.7% and 72.2%, respectively.
High Single-Tenant Concentration: Seventeen loans, representing
42.4% of the pool by balance, are backed by single-tenant
properties. This is higher than the 2020 and YTD 2021 averages of
21.5% and 26.4%, respectively. In most cases, the property serves
as the tenant's headquarters or key strategic location for
distribution.
RATING SENSITIVITIES
This section provides insight into the sensitivity of ratings when
one assumption is modified, while holding others equal. For U.S.
CMBS, the sensitivity reflects the impact of changes to property
net cash flow (NCF) in up- and down-environments. The result below
should only be considered as one potential outcome, as the
transaction is exposed to multiple dynamic risk factors. It should
not be used as an indicator of possible future performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model implied rating sensitivity to changes in one variable, Fitch
NCF:
Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf' /
'BB+sf' / 'BB-sf' / 'B-sf'.
20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'A+sf' / 'A-sf' /
'BBB+sf' / 'BBBsf' / 'BBB-sf'.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Similarly, declining cash flow decreases property value and
capacity to meet its debt service obligations. The table below
indicates the model implied rating sensitivity to changes to the
same one variable, Fitch NCF:
Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf' /
'BB+sf' / 'BB-sf' / 'B-sf'.
10% NCF Decline: 'A+sf' / 'A-sf' / 'BBB-sf' / 'BB+sf' / 'BB-sf' /
'B-sf' / 'CCCsf' / 'CCCsf'.
20% NCF Decline: 'A-sf' / 'BBBsf' / 'BB+sf' / 'B+sf' / 'CCCsf' /
'CCCsf' / 'CCCsf' / 'CCCsf'.
30% NCF Decline: 'BBBsf' / 'BB+sf' / 'Bsf' / 'CCCsf' / 'CCCsf' /
'CCCsf' / 'CCCsf'/ 'CCCsf'.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
DATA ADEQUACY
Fitch received information in accordance with its published
criteria. Sufficient data, including asset summaries, three years
of property financials, when available, and third-party reports on
the properties were received from the issuer. Ongoing performance
monitoring, including the data provided, is described in the
Surveillance section of the presale report.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CANYON CLO 2021-3: S&P Assigns BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Canyon CLO 2021-3
Ltd./Canyon CLO 2021-3 LLC's floating-rate notes.
The note issuance is a CLO securitization backed by primarily
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Canyon CLO 2021-3 Ltd./Canyon CLO 2021-3 LLC
Class A, $320.00 million: AAA (sf)
Class B, $60.00 million: AA (sf)
Class C, $30.00 million: A (sf)
Class D, $30.00 million: BBB- (sf)
Class E, $20.00 million: BB- (sf)
Subordinated notes, $41.30 million: Not rated
CARVANA AUTO 2021-P2: DBRS Finalizes BB(high) Rating on N Notes
---------------------------------------------------------------
DBRS, Inc. finalized its ratings on the following classes of notes
issued by Carvana Auto Receivables Trust 2021-P2 (CRVNA 2021-P2):
-- $112,000,000 Class A-1 Notes at R-1 (high) (sf)
-- $231,850,000 Class A-2 Notes at AAA (sf)
-- $235,810,000 Class A-3 Notes at AAA (sf)
-- $124,040,000 Class A-4 Notes at AAA (sf)
-- $25,580,000 Class B Notes at AA (high) (sf)
-- $29,060,000 Class C Notes at A (high) (sf)
-- $16,660,000 Class D Notes at BBB (high) (sf)
-- $27,430,000 Class N Notes at BB (high) (sf)
The ratings are based on DBRS Morningstar's review of the following
analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization,
subordination, a fully funded reserve fund, and excess spread.
Credit enhancement levels are sufficient to support the DBRS
Morningstar-projected cumulative net loss (CNL) assumption under
various stress scenarios.
(2) The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(3) The transaction parties' capabilities with regard to
originations, underwriting, and servicing.
-- DBRS Morningstar performed an operational review of Carvana,
LLC and Bridgecrest Credit Company, LLC and considers the entities
to be an acceptable originator and servicer, respectively, of auto
loans.
(4) The operational history of Carvana and the strength of the
overall company and its management team.
-- Company management has considerable experience in the consumer
lending business.
-- Carvana's platform is a technology-driven platform that focuses
on providing the customer with high-level experience, selection,
and value. Its website and smartphone app provide the consumer with
vehicle search and discovery (currently showing more than 40,000
vehicles online); the ability to trade or sell vehicles almost
instantaneously; and real-time, personalized financing. Carvana has
developed underwriting policies and procedures for use across the
lending platform that leverages technology where appropriate to
validate customer identity, income, employment, residency,
creditworthiness, and proper insurance coverage.
-- Carvana has developed multiple proprietary risk models to
support various aspects of its vertically integrated automotive
lending business. All proprietary risk models used in Carvana's
lending business are regularly monitored and tested. The risk
models are updated from time to time to adjust for new performance
data, changes in customer and economic trends, and additional
sources of third-party data.
(5) The credit quality of the collateral, which includes
Carvana-originated loans with Deal Scores of 50 or higher.
-- As of the June 3, 2021, cut-off date, the collateral pool for
the transaction is primarily composed of receivables due from prime
and near-prime obligors with a weighted-average (WA) FICO score of
706 and WA annual percentage rate of 7.97% and a WA loan-to-value
ratio of 89.06%. Approximately 40.42%, 40.56%, and 19.02% of the
pool include loans with Carvana Deal Scores greater than or equal
to 80, between 60 and 79, and between 50 and 59, respectively.
Additionally, 12.10% of the collateral balance is composed of
obligors with FICO scores greater than 800, 35.40% consists of FICO
scores between 701 to 800, and 3.24% is from obligors with FICO
scores less than or equal to 600 or with no FICO score.
-- DBRS Morningstar analyzed the performance of Carvana's auto
loan and retail installment contract originations and static pool
vintage loss data broken down by Deal Score to determine a
projected CNL expectation for the CRVNA 2021-P2 pool.
(6) The DBRS Morningstar CNL assumption is 2.75% based on the
cut-off date pool composition.
-- The transaction assumptions consider DBRS 'set of macroeconomic
scenarios for select economies related to the coronavirus,
available in its commentary "Global Macroeconomic Scenarios: June
2021 Update," published on June 18, 2021. DBRS Morningstar
initially published macroeconomic scenarios on April 16, 2020, that
have been regularly updated. The scenarios were last updated on
June 18, 2021, and are reflected in DBRS Morningstar's rating
analysis. The assumptions consider the moderate macroeconomic
scenario outlined in the commentary, with the moderate scenario
serving as the primary anchor for the current ratings. The moderate
scenario factors in continued success in containment during the
second half of 2021, enabling the continued relaxation of
restrictions.
(7) Carvana's financial condition as reported in its annual report
on Form 10-K filed as of February 25, 2021, and 10-Q filed as of
May 6, 2021.
(8) The legal structure and presence of legal opinions, which
address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with Carvana, that
the trust has a valid first-priority security interest in the
assets, and consistency with the DBRS Morningstar "Legal Criteria
for U.S. Structured Finance."
The rating on the Class A-1, A-2, A-3, and A-4 Notes reflects 9.70%
of initial hard credit enhancement provided by subordinated notes
in the pool (9.20%) and the reserve account (0.50%). The ratings on
the Class B, C, and D Notes reflect 6.40%, 2.65%, and 0.50% of
initial hard credit enhancement, respectively.
Notes: All figures are in U.S. dollars unless otherwise noted.
CARVANA AUTO 2021-P2: S&P Assigns BB (sf) Rating on Class N Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Carvana Auto Receivables
Trust 2021-P2's asset-backed notes series 2021-P2.
The note issuance is an ABS securitization backed by prime auto
loan receivables.
The ratings reflect S&P's view of the following:
-- The availability of approximately 17.4%, 14.7%, 11.6%, 9.0%,
and 7.0% credit support for the class A, B, C, D, and N notes,
respectively, based on stressed break-even cash flow scenarios
(including excess spread). These credit support levels provide
approximately 4.8x, 4.0x, 3.2x, 2.6x, and 1.9x coverage of S&P's
expected net loss range of 3.35%-3.85% for the class A, B, C, D,
and N notes, respectively.
-- The timely interest and principal payments by the legal final
maturity dates made under stressed cash flow modeling scenarios
that S&P deems appropriate for the assigned ratings.
-- The expectation that under a moderate ('BBB') stress scenario
(2.00x S&P's expected loss level), all else being equal, its
ratings will be within the credit stability limits specified by
section A.4 of the Appendix contained in S&P Global Rating
Definitions.
-- The collateral characteristics of the prime pool being
securitized, including a weighted average nonzero FICO score of
approximately 706 and a minimum nonzero FICO score of at least
590.
-- The loss performance of Carvana LLC's origination static pools
and managed portfolio, its deal-level collateral characteristics,
and a comparison with its prime auto finance company peers.
-- The transaction's credit enhancement in the form of
subordinated notes; a nonamortizing reserve account;
overcollateralization, which builds to a target level of 1.40% of
the initial receivables balance; and excess spread.
-- The transaction's sequential-pay structure, which builds credit
enhancement (on a percentage-of-receivables basis) as the pool
amortizes.
-- The transaction's payment and legal structures.
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Ratings Assigned
Carvana Auto Receivables Trust 2021-P2
Class A-1, $112.00 million: A-1+ (sf)
Class A-2, $231.85 million: AAA (sf)
Class A-3, $235.81 million: AAA (sf)
Class A-4, $124.04 million: AAA (sf)
Class B, $25.58 million: AA (sf)
Class C, $29.06 million: A (sf)
Class D, $16.66 million: BBB+ (sf)
Class N, $27.43 million: BB (sf)
Note: The class N notes will be paid to the extent funds are
available after the overcollateralization target is achieved.
Additionally, the class N notes will not provide any enhancement to
the senior classes.
CEDAR FUNDING IV: Moody's Assigns Ba3 Rating to Class E-RR Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
refinancing notes issued and one class of loans (together with the
Refinancing Notes, the "Refinancing Debt") incurred by Cedar
Funding IV CLO, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$2,500,000 Class X Senior Secured Floating Rate Notes due 2034,
Assigned Aaa (sf)
US$303,000,000 Class A-RR Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$65,000,000 Class AL-RR Loans due 2034, Assigned Aaa (sf)
US$68,000,000 Class B-RR Senior Secured Floating Rate Notes due
2034, Assigned Aa2 (sf)
US$27,750,000 Class C-RR Secured Deferrable Floating Rate Notes due
2034, Assigned A2 (sf)
US$32,200,000 Class D-RR Secured Deferrable Floating Rate Notes due
2034, Assigned Baa3 (sf)
US$31,625,000 Class E-RR Secured Deferrable Floating Rate Notes due
2034, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued debt are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of senior secured loans, cash,
and eligible investments, and up to 10.0% of the portfolio may
consist of non-senior secured loans.
Aegon USA Investment Management, LLC (the "Manager") will continue
to direct the selection, acquisition and disposition of the assets
on behalf of the Issuer and may engage in trading activity,
including discretionary trading, during the transaction's extended
five year reinvestment period. Thereafter, subject to certain
restrictions, the Manager may reinvest unscheduled principal
payments and proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Debt, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: reinstatement and extension of the
reinvestment period; extensions of the stated maturity and non-call
period; changes to certain collateral quality tests; changes to the
overcollateralization test levels; the inclusion of Libor
replacement provisions; additions to the CLO's ability to hold
workout and restructured assets; changes to the definition of
"Adjusted Weighted Average Rating Factor"; and changes to the base
matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $575,000,000
Defaulted par: $0
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2883
Weighted Average Spread (WAS): 3.13%
Weighted Average Recovery Rate (WARR): 48.0%
Weighted Average Life (WAL): 9.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Debt is subject to uncertainty.
The performance of the Refinancing Debt is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Debt.
CFMT 2021-HB6: DBRS Finalizes B(high) Rating on Class M5 Notes
--------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
Asset-Backed Notes, Series 2021-2, issued by CFMT 2021-HB6, LLC:
-- $796.6 million Class A at AAA (sf)
-- $6.0 million Class M1 at AA (low) (sf)
-- $50.7 million Class M2 at A (low) (sf)
-- $49.2 million Class M3 at BBB (low) (sf)
-- $45.0 million Class M4 at BB (low) (sf)
-- $8.2 million Class M5 at B (high) (sf)
The AAA (sf) rating reflects 21.7% of credit enhancement. The AA
(low) (sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B
(high) (sf) ratings reflect 15.1%, 10.1%, 5.2%, 0.8%, and 0.0% of
credit enhancement, 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 homeowners
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 Cut-Off Date (May 31, 2021), the collateral has
approximately $962.7 million in unpaid principal balance (UPB) from
4,048 performing and nonperforming home equity conversion mortgage
reverse mortgage loans and real estate owned (REO) assets secured
by first liens typically on single-family residential properties,
condominiums, townhomes, multifamily (two- to four-family)
properties, manufactured homes, and planned unit developments. A
majority of the mortgage assets (3,677, or 91.3% of the pool
balance) were previously securitized in CFMT 2019-HB1, CFMT
2020-HB2, and CFMT 2020-HB3 transactions. In addition to the
mortgage assets, the transaction will benefit from the REO Trust
Accounts from previous securitizations totaling approximately $55
million. The mortgage assets were originally originated between
1997 and 2016. Of the total assets, 1,613 have a fixed interest
rate (40.71% of the balance), with a 5.17% weighted-average coupon
(WAC). The remaining 2,435 assets have floating-rate interest
(59.29% of the balance) with a 1.63% WAC, bringing the entire
collateral pool to a 3.07% WAC.
As of the Cut-Off Date, the loans in this transaction are both
performing and nonperforming (i.e., inactive). There are 645
performing loans representing 16.04% of the total UPB. For the
3,403 nonperforming loans, 1,576 loans are referred for foreclosure
(45.55% of the balance), 227 are in bankruptcy status (5.49%), 531
are called due following recent maturity (13.20%), 311 are REO
(5.71%), 95 are inactive (0.86%), and the remaining 663 are in
default (13.14%). However, all these loans are insured by the
United States Department of Housing and Urban Development (HUD),
which mitigates losses vis-Ã -vis uninsured loans. Because the
insurance supplements the home value, the industry metric for this
collateral is not the loan-to-value ratio (LTV) but rather the WA
effective LTV adjusted for HUD insurance, which is 57.69% for the
loans in this pool. To calculate the WA LTV, DBRS Morningstar
divides the UPB by the maximum claim amount and the asset value.
Among the 645 performing assignable loans, 302 loans, representing
6.52% of the total UPB, are flagged to be assigned to HUD (the
Intended Assignment set), and 343 loans, representing 9.52% of the
total UPB, will be held, not assigned (the Strategically Held
set).
The transaction uses a sequential structure. No subordinate note
shall receive any principal payments until the senior notes (Class
A notes) have been reduced to zero. This structure provides credit
enhancement in the form of subordinate classes and reduces the
effect of realized losses. These features increase the likelihood
that holders of the most senior class of notes will receive regular
distributions of interest and/or principal. All note classes have
available fund caps.
Notes: All figures are in U.S. dollars unless otherwise noted.
CIFC FUNDING 2021-IV: S&P Assigns Prelim BB-(sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to CIFC Funding
2021-IV Ltd.'s floating-rate notes.
The note issuance is a CLO securitization backed by primarily
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of June 29,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
CIFC Funding 2021-IV Ltd.
Class A, $366.00 million: AAA (sf)
Class B, $90.00 million: AA (sf)
Class C, $36.00 million: A (sf)
Class D, $36.00 million: BBB- (sf)
Class E, $23.10 million: BB- (sf)
Subordinated notes, $57.02 million: Not rated
CITIGROUP 2021-INV1: Moody's Gives (P)B2 Rating to Cl. B-5 Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 94
classes of residential mortgage-backed securities issued by
Citigroup Mortgage Loan Trust (CMLTI) 2021-INV1. The ratings range
from (P)Aaa (sf) to (P)B2 (sf).
CMLTI 2021-INV1 securitization is backed by a pool of prime
conforming, investment property mortgage loans acquired by
Citigroup Global Markets Realty Corp. (CGMRC), the sponsor of this
transaction. CGMRC acquired the loans in the pool from one seller.
100.0% of the mortgage loans (by UPB) were acquired by the mortgage
loan seller from PennyMac (PennyMac). This deal represents the
third CMLTI securitization of prime jumbo or conforming residential
mortgage loans in 2021 and the sixth rated issue from the shelf
since its inception in 2019. All the loans are underwritten in
accordance with Freddie Mac or Fannie Mae guidelines, which take
into consideration, among other factors, the income, assets,
employment and credit score of the borrower as well as
loan-to-value (LTV). These loans were run through one of the
government sponsored enterprises' (GSE) automated underwriting
systems (AUS) and received an "Approve" or "Accept" recommendation.
Each mortgage loan is either 1) an extension of credit primarily
for a business purpose and is not a "covered transaction" as
defined in Section 1026.43(b)(1) of Regulation Z, or 2) for
purposes of the ATR Rules, relies on the exception for eligible
loan contained in 12 C.F.R. 1026.43(e)(4) (ie, the "QM patch").
PennyMac Corp. (PennyMac) will be primary servicer on the deal,
servicing 100% of the loans. There is no master servicer in this
transaction. PennyMac is the servicer and be responsible for making
P&I advances. U.S. Bank, N.A. (U.S. Bank, long term senior
unsecured 'A1') will be the trust administrator and U.S. Bank Trust
N.A. will be the trustee, and will act as the backup advancing
party.
One third-party review (TPR) firm verified the accuracy of the loan
level information that Moody's received from the sponsor. The firm
conducted detailed credit, property valuation, data accuracy and
compliance reviews on 100% of the mortgage loans in the collateral
pool. The TPR results indicate that there are no material
compliance, credit, or data issues and no appraisal defects.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model.
In this transaction, the Class A-11 and A-11A coupons are indexed
to SOFR. However, based on the transaction's structure, the
particular choice of benchmark has no credit impact. First,
interest payments to the notes, including the floating rate notes,
are subject to the net WAC cap, which prevents the floating rate
notes from incurring interest shortfalls as a result of increases
in the benchmark index above the fixed rates at which the assets
bear interest. Second, the shifting-interest structure pays all
interest generated on the assets to the bonds and does not provide
for any excess spread.
The complete rating action are as follows.
Issuer: CMLTI 2021-INV1
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-1-IO1, Assigned (P)Aaa (sf)
Cl. A-1-IO2, Assigned (P)Aaa (sf)
Cl. A-1-IOX*, Assigned (P)Aaa (sf)
Cl. A-1A, Assigned (P)Aaa (sf)
Cl. A-1-IO3, Assigned (P)Aaa (sf)
Cl. A-1-IO1W, Assigned (P)Aaa (sf)
Cl. A-1-IO2W, Assigned (P)Aaa (sf)
Cl. A-1W, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-2-IO1, Assigned (P)Aaa (sf)
Cl. A-2-IO2*, Assigned (P)Aaa (sf)
Cl. A-2-IOX*, Assigned (P)Aaa (sf)
Cl. A-2A, Assigned (P)Aaa (sf)
Cl. A-2-IO3*, Assigned (P)Aaa (sf)
Cl. A-2-IO1W*, Assigned (P)Aaa (sf)
Cl. A-2-IO2W*, Assigned (P)Aaa (sf)
Cl. A-2W, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-3-IO1*, Assigned (P)Aaa (sf)
Cl. A-3-IO2*, Assigned (P)Aaa (sf)
Cl. A-3-IOX*, Assigned (P)Aaa (sf)
Cl. A-3A, Assigned (P)Aaa (sf)
Cl. A-3-IO3*, Assigned (P)Aaa (sf)
Cl. A-3-IO1W*, Assigned (P)Aaa (sf)
Cl. A-3-IO2W*, Assigned (P)Aaa (sf)
Cl. A-3W, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-4-IO1*, Assigned (P)Aaa (sf)
Cl. A-4-IO2*, Assigned (P)Aaa (sf)
Cl. A-4-IOX*, Assigned (P)Aaa (sf)
Cl. A-4A, Assigned (P)Aaa (sf)
Cl. A-4-IO3*, Assigned (P)Aaa (sf)
Cl. A-4-IO1W*, Assigned (P)Aaa (sf)
Cl. A-4-IO2W*, Assigned (P)Aaa (sf)
Cl. A-4W, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-5-IO1*, Assigned (P)Aaa (sf)
Cl. A-5-IO2*, Assigned (P)Aaa (sf)
Cl. A-5-IOX*, Assigned (P)Aaa (sf)
Cl. A-5A, Assigned (P)Aaa (sf)
Cl. A-5-IO3*, Assigned (P)Aaa (sf)
Cl. A-5-IO1W*, Assigned (P)Aaa (sf)
Cl. A-5-IO2W*, Assigned (P)Aaa (sf)
Cl. A-5W, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-6-IO1*, Assigned (P)Aaa (sf)
Cl. A-6-IO2*, Assigned (P)Aaa (sf)
Cl. A-6-IOX*, Assigned (P)Aaa (sf)
Cl. A-6A , Assigned (P)Aaa (sf)
Cl. A-6-IO3*, Assigned (P)Aaa (sf)
Cl. A-6-IO1W*, Assigned (P)Aaa (sf)
Cl. A-6-IO2W*, Assigned (P)Aaa (sf)
Cl. A-6W, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-7-IO1*, Assigned (P)Aaa (sf)
Cl. A-7-IO2*, Assigned (P)Aaa (sf)
Cl. A-7-IOX*, Assigned (P)Aaa (sf)
Cl. A-7A, Assigned (P)Aaa (sf)
Cl. A-7-IO3*, Assigned (P)Aaa (sf)
Cl. A-7-IO1W*, Assigned (P)Aaa (sf)
Cl. A-7-IO2W*, Assigned (P)Aaa (sf)
Cl. A-7W, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-8-IO1*, Assigned (P)Aaa (sf)
Cl. A-8-IO2*, Assigned (P)Aaa (sf)
Cl. A-8-IOX*, Assigned (P)Aaa (sf)
Cl. A-8A, Assigned (P)Aaa (sf)
Cl. A-8-IO3*, Assigned (P)Aaa (sf)
Cl. A-8-IO1W*, Assigned (P)Aaa (sf)
Cl. A-8-IO2W*, Assigned (P)Aaa (sf)
Cl. A-8W, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-11-IO*, Assigned (P)Aaa (sf)
Cl. A-11A, Assigned (P)Aaa (sf)
Cl. A-11A-IO*, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. B-1, Assigned (P)Aa2 (sf)
Cl. B-1-IO*, Assigned (P)Aa2 (sf)
Cl. B-1-IOX*, Assigned (P)Aa2 (sf)
Cl. B-1-IOW*, Assigned (P)Aa2 (sf)
Cl. B-1W, Assigned (P)Aa2 (sf)
Cl. B-2, Assigned (P)A2 (sf)
Cl. B-2-IO*, Assigned (P)A2 (sf)
Cl. B-2-IOX*, Assigned (P)A2 (sf)
Cl. B-2-IOW*, Assigned (P)A2 (sf)
Cl. B-2W, Assigned (P)A2 (sf)
Cl. B-3, Assigned (P)Baa2 (sf)
Cl. B-3-IO*, Assigned (P)Baa2 (sf)
Cl. B-3-IOX*, Assigned (P)Baa2 (sf)
Cl. B-3-IOW*, Assigned (P)Baa2 (sf)
Cl. B-3W, Assigned (P)Baa2 (sf)
Cl. B-4, Assigned (P)Ba2 (sf)
Cl. B-5, Assigned (P)B2 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean is
0.38%, in a baseline scenario-median is 0.21%, and reaches 4.04% at
a stress level consistent with Moody's Aaa ratings.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US
economy continues on the path toward normalization. Economic
activity will continue to strengthen in 2021 because of several
factors, including the rollout of vaccines, growing household
consumption and an accommodative central bank policy. However,
specific sectors and individual businesses will remain weakened by
extended pandemic related restrictions.
Moody's increased its model-derived median expected losses by
10.00% (6.71% for the mean) and Moody's Aaa loss by 2.50% to
reflect the likely performance deterioration resulting from the
slowdown in US economic activity due to the coronavirus outbreak.
These adjustments are lower than the 15% median expected loss and
5% Aaa loss adjustments Moody's made on pools from deals issued
after the onset of the pandemic until February 2021. Moody's
reduced adjustments reflect the fact that the loan pool in this
deal does not contain any loans to borrowers who are not currently
making payments. For newly originated mortgage loans, post-COVID
underwriting takes into account the impact of the pandemic on a
borrower's ability to repay the mortgage. For seasoned mortgage
loans, as time passes, the likelihood that borrowers who have
continued to make payments throughout the pandemic will now become
non-cash flowing due to COVID-19 continues to decline.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the TPR and the R&W framework of the
transaction.
Collateral Description
As of the cut-off date, the mortgage loans will consist of 758
conforming mortgage loans with an aggregate stated principal
balance of approximately $247,686,487. The mortgage loans will
consist of conventional, fixed-rate, fully amortizing mortgage
loans, which will have original terms to maturity of up to 30
years. All of the mortgage loans will be secured by first liens on
single-family residential properties, planned unit developments,
Multi-Family or condominiums. All loans are current as of the
cut-off date. Overall, the credit quality of the mortgage loans
backing this transaction is in-line with recently issued prime
jumbo transactions Moody's have rated, with average length of
employment of 9.0 years, average monthly primary and all borrower
wage income of $14,300 and $17,408, respectively. Furthermore, the
average liquid/cash reserves is $251,514 with approximately 93.2
months of liquid/cash reserves. The average monthly residual income
is approximately $13,040
The pool has clean pay history and weighted average (WA) seasoning
of approximately 2.97 months. No borrower under any mortgage loan
is currently in an active COVID-19 related forbearance plan with
the servicer. All mortgage loans are current as of the cut-off
date. The weighted average (WA) FICO for the aggregate pool is 779
with a WA LTV of 60.5% and WA CLTV of 60.6%.
Approximately 30% of the mortgage loans by count are "Appraisal
Waiver" (AW) loans, whereby the sponsor obtained an AW for each
such mortgage loan from Fannie Mae or Freddie Mac through their
respective programs. In each case, neither Fannie Mae nor Freddie
Mac required an appraisal of the related mortgaged property as a
condition of approving the related mortgage loan for purchase by
Fannie Mae or Freddie Mac, as applicable.
Aggregation and Origination Quality
Citigroup Global Markets Realty Corp. (CGMRC) aggregated 100% of
the pool. Based on the available information related to CGMRC's
valuation and risk management practices, the 100% TPR, and the
transparent R&W framework in this transaction, Moody's did not make
any adjustments to Moody's losses based on Moody's review of
CGMRC's aggregation quality.
PennyMac Financial Services Inc. (PennyMac) originated 100% of the
pool. Moody's consider PennyMac to have an adequate origination
quality of conforming mortgages. As a result, Moody's did not make
any adjustments to Moody's base case and Aaa stress loss
assumptions based on Moody's review of PennyMac's loan performance
and origination practices.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool as
adequate, and as a result Moody's did not make any adjustments to
Moody's base case and Aaa stress loss assumptions. Moody's did not
apply any adjustment to Moody's expected losses for the lack of
master servicer due to the following: (i) PennyMac was established
in 2008 and is an experienced servicer of residential mortgage
loans;
PennyMac is an approved servicer for both Fannie Mae and Freddie
Mac; (ii) PennyMac had no instances of non-compliance for its 2020
Regulation AB or Uniformed Single Audit Program (USAP) independent
servicer reviews; (iii) Although not directly related to this
transaction, there is still third party oversight of PennyMac from
the GSEs, the CFPB, the accounting firms and state regulators; (iv)
The complexity of the loan product is relatively low, reducing the
complexity of servicing and reporting; and (v)
U.S. Bank, as the trust administrator, will not only be responsible
for aggregating the reports from the servicers and reporting to
investors, but also for acting as the backup advancing party, and
appointing a replacement servicer at the direction of the
controlling holder.
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit and property valuation. The due
diligence results confirm compliance with the applicable
underwriting guidelines for the vast majority of loans, no material
regulatory compliance issues. The loans that had exceptions to the
applicable underwriting guidelines had significant compensating
factors that were documented.
Representations & Warranties
An effective R&W framework protects a transaction against the risk
of loss from fraudulent or defective loans. Moody's assessed CMLTI
2021-INV1's R&W framework for this transaction as adequate,
consistent with that of other private label transactions for which
the breach review process is thorough, transparent and objective,
and the costs and manner of review are clearly outlined at
issuance.
The transaction requires mandatory independent reviews of loans
that become 120 days delinquent (other than certain loans in FEMA
disaster areas and those in forbearance as a result of a pandemic
or national disaster) and those that liquidate at a loss to
determine if any of the R&Ws are breached. The R&Ws are
comprehensive and the R&W provider is CGMRC, an affiliate of
Citigroup, Inc. (rated A3). The R&W provider will be obligated to
cure or repurchase loans found to have material breaches of R&Ws,
or pay for any loss if that loan was liquidated.
Transaction Structure
CMLTI 2021-INV1 has one pool with a shifting interest structure
that benefits from a subordination floor. Funds collected,
including principal, are first used to make interest payments and
then principal payments to the senior bonds, and then interest and
principal payments to each subordinate bond. As in all transactions
with shifting interest structures, the senior bonds benefit from a
cash flow waterfall that allocates all prepayments to the senior
bond for a specified period of time, and increasing amounts of
prepayments to the subordinate bonds thereafter, but only if loan
performance satisfies delinquency and loss tests.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 1.00% of the cut-off date pool
balance, and as subordination lock-out amount of 1.00% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
CITIGROUP 2021-INV1: S&P Assigns Prelim B (sf) Rating on B-5 Certs
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Citigroup
Mortgage Loan Trust 2021-INV1's $247.7 million mortgage
pass-through certificates.
The issuance is an RMBS transaction backed by first-lien,
fixed-rate, fully amortizing residential mortgage loans secured by
one- to four-family residential properties, planned-unit
developments, and condominiums to prime borrowers. The pool
consists of 758 investor ability-to-repay exempt mortgage loans.
The preliminary ratings are based on the term sheet dated June 25,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The high-quality collateral in the pool;
-- The transaction's credit enhancement;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty;
-- PennyMac Loan Services LLC, which provides fulfillment services
to PennyMac Corp.;
-- The geographic concentration;
-- The 100% due diligence results consistent with the represented
loan characteristics; and
-- The impact that the economic stress brought on by COVID-19
pandemic will likely have on the performance of the mortgage
borrowers in the pool and liquidity available in the transaction.
Preliminary Ratings Assigned(i)
Citigroup Mortgage Loan Trust 2021-INV1
Class A-1, $126,325,000: AAA (sf)
Class A-1-IO1, $126,325,000(ii): AAA (sf)
Class A-1-IO2, $126,325,000(ii): AAA (sf)
Class A-1-IOX, $126,325,000(ii): AAA (sf)
Class A-1A, $126,325,000: AAA (sf)
Class A-1-IO3, $126,325,000(ii): AAA (sf)
Class A-1-IO1W, $126,325,000(ii): AAA (sf)
Class A-1-IO2W, $126,325,000(ii): AAA (sf)
Class A-1W, $126,325,000: AAA (sf)
Class A-2, $52,635,000: AAA (sf)
Class A-2-IO1, $52,635,000(ii): AAA (sf)
Class A-2-IO2, $52,635,000(ii): AAA (sf)
Class A-2-IOX, $52,635,000(ii): AAA (sf)
Class A-2A, $52,635,000: AAA (sf)
Class A-2-IO3, $52,635,000(ii): AAA (sf)
Class A-2-IO1W, $52,635,000(ii): AAA (sf)
Class A-2-IO2W, $52,635,000(ii): AAA (sf)
Class A-2W, $52,635,000: AAA (sf)
Class A-3, $210,535,000: AAA (sf)
Class A-3-IO1, $210,535,000(ii): AAA (sf)
Class A-3-IO2, $210,535,000(ii): AAA (sf)
Class A-3-IOX, $210,535,000(ii): AAA (sf)
Class A-3A, $210,535,000: AAA (sf)
Class A-3-IO3, $210,535,000(ii): AAA (sf)
Class A-3-IO1W, $210,535,000(ii): AAA (sf)
Class A-3-IO2W, $210,535,000(ii): AAA (sf)
Class A-3W, $210,535,000: AAA (sf)
Class A-4, $19,318,000: AAA (sf)
Class A-4-IO1, $19,318,000(ii): AAA (sf)
Class A-4-IO2, $19,318,000(ii): AAA (sf)
Class A-4-IOX, $19,318,000(ii): AAA (sf)
Class A-4A, $19,318,000: AAA (sf)
Class A-4-IO3, $19,318,000(ii): AAA (sf)
Class A-4-IO1W, $19,318,000(ii): AAA (sf)
Class A-4-IO2W, $19,318,000(ii): AAA (sf)
Class A-4W, $19,318,000: AAA (sf)
Class A-5, $229,853,000: AAA (sf)
Class A-5-IO1, $229,853,000(ii): AAA (sf)
Class A-5-IO2, $229,853,000(ii): AAA (sf)
Class A-5-IOX, $229,853,000(ii): AAA (sf)
Class A-5A, $229,853,000: AAA (sf)
Class A-5-IO3, $229,853,000(ii): AAA (sf)
Class A-5-IO1W, $229,853,000(ii): AAA (sf)
Class A-5-IO2W, $229,853,000(ii): AAA (sf)
Class A-5W, $229,853,000: AAA (sf)
Class A-6, $31,575,000: AAA (sf)
Class A-6-IO1, $31,575,000(ii): AAA (sf)
Class A-6-IO2, $31,575,000(ii): AAA (sf)
Class A-6-IOX, $31,575,000(ii): AAA (sf)
Class A-6A, $31,575,000: AAA (sf)
Class A-6-IO3, $31,575,000(ii): AAA (sf)
Class A-6-IO1W, $31,575,000(ii): AAA (sf)
Class A-6-IO2W, $31,575,000(ii): AAA (sf)
Class A-6W, $31,575,000: AAA (sf)
Class A-7, $157,900,000: AAA (sf)
Class A-7-IO1, $157,900,000(ii): AAA (sf)
Class A-7-IO2, $157,900,000(ii): AAA (sf)
Class A-7-IOX, $157,900,000(ii): AAA (sf)
Class A-7A, $157,900,000: AAA (sf)
Class A-7-IO3, $157,900,000(ii): AAA (sf)
Class A-7-IO1W, $157,900,000(ii): AAA (sf)
Class A-7-IO2W, $157,900,000(ii): AAA (sf)
Class A-7W, $157,900,000: AAA (sf)
Class A-8, $84,210,000: AAA (sf)
Class A-8-IO1, $84,210,000(ii): AAA (sf)
Class A-8-IO2, $84,210,000(ii): AAA (sf)
Class A-8-IOX, $84,210,000(ii): AAA (sf)
Class A-8A, $84,210,000: AAA (sf)
Class A-8-IO3, $84,210,000(ii): AAA (sf)
Class A-8-IO1W, $84,210,000(ii): AAA (sf)
Class A-8-IO2W, $84,210,000(ii): AAA (sf)
Class A-8W, $84,210,000: AAA (sf)
Class A-11, $8,421,400: AAA (sf)
Class A-11-IO, $8,421,400(ii): AAA (sf)
Class A-11-A, $42,107,000: AAA (sf)
Class A-11-AIO, $42,107,000(ii): AAA (sf)
Class A-12, $8,421,400: AAA (sf)
Class B-1, $7,182,000: AA (sf)
Class B-1-IO, $7,182,000(ii): AA (sf)
Class B-1-IOX, $7,182,000(ii): AA (sf)
Class B-1-IOW, $7,182,000(ii): AA (sf)
Class B-1W, $7,182,000: AA (sf)
Class B-2, $4,830,000: A (sf)
Class B-2-IO, $4,830,000(ii): A (sf)
Class B-2-IOX, $4,830,000(ii): A (sf)
Class B-2-IOW, $4,830,000(ii): A (sf)
Class B-2W, $4,830,000: A (sf)
Class B-3, $2,353,000: BBB (sf)
Class B-3-IO, $2,353,000(ii): BBB (sf)
Class B-3-IOX, $2,353,000(ii): BBB (sf)
Class B-3-IOW, $2,353,000(ii): BBB (sf)
Class B-3W, $2,353,000: BBB (sf)
Class B-4, $1,486,000: BB (sf)
Class B-5, $867,000: B (sf)
Class B-6, $1,115,470: Not rated
Class PT, $247,686,470(ii): Not rated
Class R, not applicable: Not rated
Note:
(i)The collateral and structural information in this report reflect
the term sheet dated June 25, 2021.
(ii)Notional balance.
IO--Interest only.
CITIGROUP 2021-RP4: Fitch Assigns Final B Rating on B-2 Debt
------------------------------------------------------------
Fitch Ratings has assigned final ratings to Citigroup Mortgage Loan
Trust 2021-RP4 (CMLTI 2021-RP4).
DEBT RATING PRIOR
---- ------ -----
CMLTI 2021-RP4
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT AAsf New Rating AA(EXP)sf
A-4 LT Asf New Rating A(EXP)sf
A-5 LT BBBsf New Rating BBB(EXP)sf
M-1 LT Asf New Rating A(EXP)sf
M-2 LT BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
B-4 LT NRsf New Rating NR(EXP)sf
B-5 LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
X LT NRsf New Rating NR(EXP)sf
SA LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch Ratings has assigned final ratings to the residential
mortgage-backed notes to be issued by Citigroup Mortgage Loan Trust
2021-RP4 (CMLTI 2021-RP4), as indicated above. The transaction is
expected to close on June 30, 2021. The notes are supported by a
collateral group consisting of 14,648 seasoned performing loans
(SPLs) and reperforming loans (RPLs), with a total balance of
approximately $2,634.8 million, including $558.7 million, or
21.21%, of the aggregate pool balance in noninterest-bearing
deferred principal amounts as of the cutoff date.
Distributions of principal and interest (P&I) and loss allocations
are based on a traditional, senior-subordinate, sequential
structure. The sequential-pay structure locks out principal to the
subordinated notes until the most senior notes outstanding are paid
in full. The servicer will not advance delinquent monthly payments
of P&I.
KEY RATING DRIVERS
Distressed Performance History (Negative): The collateral pool
consists primarily of peak-vintage SPLs and RPLs. After adjusting
for coronavirus-related forbearance loans, 1.8% of the pool was 30
days delinquent as of the cutoff date, and 25% of loans are current
but have had delinquencies within the past 24 months (after being
adjusted for Fitch's treatment of coronavirus-related forbearance
and deferral loans).
Roughly 98% by unpaid principal balance (UPB) have been modified.
Fitch increased its loss expectations to account for the delinquent
loans and a high percentage of "dirty current" loans. See the Asset
Analysis section for additional information.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
those classes in the absence of servicer advancing.
No Servicer P&I Advances (Mixed): The servicer will not advance
delinquent monthly payments of P&I, which reduces liquidity to the
trust. P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust.
Due to the lack of P&I advancing, the loan-level loss severity (LS)
is less for this transaction than for those where the servicer is
obligated to advance P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' and 'AAsf' rated
classes.
Updated Economic Risk Factor (ERF) (Positive): Consistent with the
Additional Scenario Analysis section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to Fitch's macroeconomic baseline scenario or
if actual performance data indicate the current assumptions require
reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data and the unexpected
development in the health crisis arising from the advancement and
availability of coronavirus vaccines, Fitch reconsidered the
application of its coronavirus-related ERF floor of 2.0 and used
ERF floors of 1.5 and 1.0 for the 'BBsf' and 'Bsf' rating stresses,
respectively. Fitch's "Global Economic Outlook -- March 2021" and
related baseline economic scenario forecasts have been revised to
6.2% U.S. GDP growth for 2021 and 3.3% for 2022 following negative
3.5% GDP growth in 2020.
Additionally, Fitch's U.S. unemployment forecasts for 2021 and 2022
are 5.8% and 4.7%, respectively, down from 8.1% in 2020. These
revised forecasts support Fitch reverting to the 1.5 and 1.0 ERF
floors described in Fitch's "U.S. RMBS Loan Loss Model Criteria."
Social Impact Rating Relevant: CMLTI 2021-RP4 has an ESG Relevance
Score of '4[+]' for transaction parties and operational risk.
Operational risk is well controlled for in CMLTI 2021-RP4,
including strong R&Ws and transaction due diligence, as well as a
strong servicer, which resulted in a reduction in expected losses.
See the ESG Navigator in the presale for further details.
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. The implied rating sensitivities are only
an indication of some of the potential outcomes and do not consider
other risk factors that the transaction may become exposed to, or
that may be considered in the surveillance of the transaction.
Sensitivity analysis was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool, and lower
MVDs illustrated by a gain in home prices.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to negative MVDs at the national
level, or positive home price growth with no assumed
overvaluation. The analysis assumes positive home price growth
of 10%. Excluding the senior class, which is already 'AAAsf',
the analysis indicates there is potential positive rating
migration for all of the rated classes.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 40.3% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC. The third-party due diligence review was
completed on 100% of the loans in this transaction. The scope of
the due diligence review was consistent with Fitch criteria for
seasoned collateral. While all but two loans are seasoned 24 months
or greater, 253 loans received a credit and property valuation
review in additional to a regulatory compliance review. All loans
received an updated tax and title search and review of servicing
comments.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustments to its analysis: increased the
loss severity due to HUD-1 issues, increased liquidation timelines
for loans missing modification agreements, and haircut the broker
price opinion values for loans where the due diligence showed
property damage. These adjustments resulted in an increase in the
'AAAsf' expected loss of approximately 0.20%.
ESG CONSIDERATIONS
CMLTI 2021-RP4 has an ESG Relevance Score of '4[+]' for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in CMLTI 2021-RP4, including strong R&Ws and transaction due
diligence, as well as a strong servicer, which resulted in a
reduction in expected losses.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CITIGROUP MORTGAGE 2021-RP4: Fitch Gives B(EXP) Rating to B-2 Debt
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Citigroup Mortgage
Loan Trust 2021-RP4 (CMLTI 2021-RP4).
DEBT RATING
---- ------
CMLTI 2021-RP4
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT AA(EXP)sf Expected Rating
A-4 LT A(EXP)sf Expected Rating
A-5 LT BBB(EXP)sf Expected Rating
M-1 LT A(EXP)sf Expected Rating
M-2 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-4 LT NR(EXP)sf Expected Rating
B-5 LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
SA LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch Ratings expects to rate the residential mortgage-backed notes
to be issued by Citigroup Mortgage Loan Trust 2021-RP4 (CMLTI
2021-RP4), as indicated above. The transaction is expected to close
on June 30, 2021. The notes are supported by a collateral group
consisting of 14,648 seasoned performing loans (SPLs) and
reperforming loans (RPLs), with a total balance of approximately
$2,634.8 million, including $558.7 million, or 21.21%, of the
aggregate pool balance in noninterest-bearing deferred principal
amounts as of the cutoff date.
Distributions of principal and interest (P&I) and loss allocations
are based on a traditional, senior-subordinate, sequential
structure. The sequential-pay structure locks out principal to the
subordinated notes until the most senior notes outstanding are paid
in full. The servicer will not advance delinquent monthly payments
of P&I.
KEY RATING DRIVERS
Distressed Performance History (Negative): The collateral pool
consists primarily of peak-vintage SPLs and RPLs. After adjusting
for coronavirus-related forbearance loans, 1.8% of the pool was 30
days delinquent as of the cutoff date, and 25% of loans are current
but have had delinquencies within the past 24 months (after being
adjusted for Fitch's treatment of coronavirus-related forbearance
and deferral loans).
Roughly 98% by unpaid principal balance (UPB) have been modified.
Fitch increased its loss expectations to account for the delinquent
loans and a high percentage of "dirty current" loans. See the Asset
Analysis section for additional information.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
those classes in the absence of servicer advancing.
No Servicer P&I Advances (Mixed): The servicer will not advance
delinquent monthly payments of P&I, which reduces liquidity to the
trust. P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust.
Due to the lack of P&I advancing, the loan-level loss severity (LS)
is less for this transaction than for those where the servicer is
obligated to advance P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' and 'AAsf' rated
classes.
Updated Economic Risk Factor (ERF) (Positive): Consistent with the
Additional Scenario Analysis section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to Fitch's macroeconomic baseline scenario or
if actual performance data indicate the current assumptions require
reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data and the unexpected
development in the health crisis arising from the advancement and
availability of coronavirus vaccines, Fitch reconsidered the
application of its coronavirus-related ERF floors of 2.0 and used
ERF floors of 1.5 and 1.0 for the 'BBsf' and 'Bsf' rating stresses,
respectively. Fitch's "Global Economic Outlook -- March 2021" and
related baseline economic scenario forecasts have been revised to
6.2% U.S. GDP growth for 2021 and 3.3% for 2022 following negative
3.5% GDP growth in 2020.
Additionally, Fitch's U.S. unemployment forecasts for 2021 and 2022
are 5.8% and 4.7%, respectively, down from 8.1% in 2020. These
revised forecasts support Fitch reverting to the 1.5 and 1.0 ERF
floors described in Fitch's "U.S. RMBS Loan Loss Model Criteria."
Social Impact Rating Relevant: CMLTI 2021-RP4 has an ESG Relevance
Score of '4[+]' for transaction parties and operational risk.
Operational risk is well controlled for in CMLTI 2021-RP4,
including strong R&Ws and transaction due diligence, as well as a
strong servicer, which resulted in a reduction in expected losses.
See the ESG Navigator in the presale for further details.
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. The implied rating sensitivities are only
an indication of some of the potential outcomes and do not consider
other risk factors that the transaction may become exposed to, or
that may be considered in the surveillance of the transaction.
Sensitivity analysis was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool, and lower
MVDs illustrated by a gain in home prices.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to negative MVDs at the national
level, or positive home price growth with no assumed
overvaluation. The analysis assumes positive home price growth
of 10%. Excluding the senior class, which is already 'AAAsf',
the analysis indicates there is potential positive rating
migration for all of the rated classes.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 40.3% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC. The third-party due diligence review was
completed on 100% of the loans in this transaction. The scope of
the due diligence review was consistent with Fitch criteria for
seasoned collateral. While all but two loans are seasoned 24 months
or greater, 253 loans received a credit and property valuation
review in additional to a regulatory compliance review. All loans
received an updated tax and title search and review of servicing
comments.
Fitch considered this information in its analysis and, as a result,
Fitch made the following adjustments to its analysis: increased the
loss severity due to HUD-1 issues, increased liquidation timelines
for loans missing modification agreements, and haircut the BPO
values for loans where the due diligence showed property damage.
These adjustments resulted in an increase in the 'AAAsf' expected
loss of approximately 0.20%.
ESG CONSIDERATIONS
CMLTI 2021-RP4 has an ESG Relevance Score of '4[+]' for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in CMLTI 2021-RP4, including strong R&Ws and transaction due
diligence, as well as a strong servicer, which resulted in a
reduction in expected losses.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CREDIT SUISSE 2007-C5: Fitch Affirms D Rating on 15 Tranches
------------------------------------------------------------
Fitch Ratings has taken various actions on already distressed bonds
across four U.S. commercial mortgage-backed securities (CMBS)
transactions.
DEBT RATING PRIOR
---- ------ -----
Credit Suisse Commercial Mortgage Trust 2007-C5
A-1-AJ 22546BBW9 LT Dsf Affirmed Dsf
A-J 22546BAJ9 LT Dsf Affirmed Dsf
A-M 22546BAH3 LT Dsf Affirmed Dsf
B 22546BAK6 LT Dsf Affirmed Dsf
C 22546BAM2 LT Dsf Affirmed Dsf
D 22546BAP5 LT Dsf Affirmed Dsf
E 22546BAR1 LT Dsf Affirmed Dsf
F 22546BAT7 LT Dsf Affirmed Dsf
G 22546BAV2 LT Dsf Affirmed Dsf
H 22546BAX8 LT Dsf Affirmed Dsf
J 22546BAZ3 LT Dsf Affirmed Dsf
K 22546BBB5 LT Dsf Affirmed Dsf
L 22546BBD1 LT Dsf Affirmed Dsf
M 22546BBF6 LT Dsf Affirmed Dsf
N 22546BBH2 LT Dsf Affirmed Dsf
Bear Stearns Commercial Mortgage Securities Trust 2007-TOP28
C 073945AL1 LT Dsf Downgrade CCCsf
C 073945AL1 LT WDsf Withdrawn CCCsf
D 073945AN7 LT Dsf Downgrade Csf
D 073945AN7 LT WDsf Withdrawn Csf
E 073945AQ0 LT Dsf Downgrade Csf
E 073945AQ0 LT WDsf Withdrawn Csf
F 073945AS6 LT Dsf Downgrade Csf
F 073945AS6 LT WDsf Withdrawn Csf
G 073945AU1 LT Dsf Affirmed Dsf
G 073945AU1 LT WDsf Withdrawn Dsf
H 073945AW7 LT Dsf Affirmed Dsf
H 073945AW7 LT WDsf Withdrawn Dsf
J 073945AY3 LT Dsf Affirmed Dsf
J 073945AY3 LT WDsf Withdrawn Dsf
K 073945BA4 LT Dsf Affirmed Dsf
K 073945BA4 LT WDsf Withdrawn Dsf
L 073945BC0 LT Dsf Affirmed Dsf
L 073945BC0 LT WDsf Withdrawn Dsf
M 073945BE6 LT Dsf Affirmed Dsf
M 073945BE6 LT WDsf Withdrawn Dsf
N 073945BG1 LT Dsf Affirmed Dsf
N 073945BG1 LT WDsf Withdrawn Dsf
O 073945BJ5 LT Dsf Affirmed Dsf
O 073945BJ5 LT WDsf Withdrawn Dsf
Cobalt CMBS Commercial Mortgage Trust 2007-C3
C 19075DAL5 LT Dsf Affirmed Dsf
C 19075DAL5 LT WDsf Withdrawn Dsf
D 19075DAM3 LT Dsf Affirmed Dsf
D 19075DAM3 LT WDsf Withdrawn Dsf
E 19075DAN1 LT Dsf Affirmed Dsf
E 19075DAN1 LT WDsf Withdrawn Dsf
F 19075DAP6 LT Dsf Affirmed Dsf
F 19075DAP6 LT WDsf Withdrawn Dsf
G 19075DAT8 LT Dsf Affirmed Dsf
G 19075DAT8 LT WDsf Withdrawn Dsf
H 19075DAU5 LT Dsf Affirmed Dsf
H 19075DAU5 LT WDsf Withdrawn Dsf
J 19075DAV3 LT Dsf Affirmed Dsf
J 19075DAV3 LT WDsf Withdrawn Dsf
K 19075DAW1 LT Dsf Affirmed Dsf
K 19075DAW1 LT WDsf Withdrawn Dsf
L 19075DAX9 LT Dsf Affirmed Dsf
L 19075DAX9 LT WDsf Withdrawn Dsf
M 19075DAY7 LT Dsf Affirmed Dsf
M 19075DAY7 LT WDsf Withdrawn Dsf
N 19075DAZ4 LT Dsf Affirmed Dsf
N 19075DAZ4 LT WDsf Withdrawn Dsf
O 19075DBA8 LT Dsf Affirmed Dsf
O 19075DBA8 LT WDsf Withdrawn Dsf
LB-UBS Commercial Mortgage Trust 2007-C6
H 52109PAY1 LT Dsf Downgrade Csf
All ratings in Bear Stearns Commercial Mortgage Securities Trust
2007-TOP28 and Cobalt CMBS Commercial Mortgage Trust 2007-C3 have
subsequently been withdrawn, as there is no remaining collateral
and their trust balances have been reduced to zero. These ratings
are no longer considered by Fitch to be relevant to the agency's
coverage.
KEY RATING DRIVERS
Fitch has downgraded four classes of Bear Stearns Commercial
Mortgage Securities Trust 2007-TOP28 to 'Dsf' as they have incurred
principal losses from the liquidation of the sole remaining REO
Charleston Town Center asset. Class C was previously rated 'CCCsf,'
which indicated default was possible, and classes D, E, and F were
previously rated 'Csf,' which indicated default was inevitable.
Fitch has also downgraded class H of LB-UBS Commercial Mortgage
Trust 2007-C6 to 'Dsf' due to realized losses; the class was
previously rated 'Csf,' which indicated default was inevitable.
Additionally, Fitch has affirmed 15 classes of Credit Suisse
Commercial Mortgage Trust 2007-C5, 12 classes of Cobalt CMBS
Commercial Mortgage Trust 2007-C3, and eight classes of Bear
Stearns Commercial Mortgage Securities Trust 2007-TOP28 at 'Dsf' as
a result of previously incurred losses.
RATING SENSITIVITIES
No further rating changes are expected as these bonds have incurred
principal losses. While the bonds that have defaulted are not
expected to recover any material amount of lost principal in the
future, there is a limited possibility this may happen. In this
unlikely scenario, Fitch would further review the affected
classes.
Today's actions are limited to the bonds that have incurred losses.
Any remaining bonds in LB-UBS Commercial Mortgage Trust 2007-C6
have not been analyzed as part of this review.
The ratings in Bear Stearns Commercial Mortgage Securities Trust
2007-TOP28 and Cobalt CMBS Commercial Mortgage Trust 2007-C3 have
been withdrawn and no further rating changes are possible.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
AUTOMATIC WITHDRAWAL OF THE LAST DEFAULT RATING
Default ratings ('Dsf') assigned to the last rated class of a
transaction will be automatically withdrawn within 11 months from
the date of this rating action. A separate RAC will not be issued
at that time.
CROWN POINT 10: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to Crown Point CLO 10
Ltd.'s floating-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Crown Point CLO 10 Ltd.
Class A, $150.00 million: AAA (sf)
Class A loans, $96.00 million: AAA (sf)
Class B, $58 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $20.80 million: BBB- (sf)
Class E (deferrable), $18.20 million: BB- (sf)
Subordinated notes, $39.90 million: Not rated
CSMC 2021-NQM4: Fitch Gives 'B(EXP)' Rating to Class B-2 Debt
-------------------------------------------------------------
Fitch Ratings has assigned expected ratings to CSMC 2021-NQM4.
DEBT RATING
---- ------
CSMC 2021-NQM4
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
PT LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The notes are supported by 392 loans with a balance of $251.38
million as of the cutoff date. The notes are secured mainly by
nonqualified mortgages (Non-QM) as defined by the Ability to Repay
(ATR) Rule. Of the pool, 78% comprises loans designated as
Non-Qualified Mortgages (Non-QM) and 20% are investment properties
not subject to the ATR Rule. The remaining are a mix of Safe Harbor
Qualified Mortgages (SHQMs) and Higher-Priced Qualified Mortgages
(HPQMs).
Credit Suisse (CS) aggregated the loans in the pool from various
originators. Approximately 31% of the pool was originated or
acquired by AmWest Funding Corp. (AmWest), 30% was originated or
acquired by Sprout Mortgage, LLC (Sprout) and 14% was originated or
acquired by Athas Capital Group, Inc. (Athas). The remaining loans
were originated or acquired by various entities that each
contributed less than 10% to the pool. Select Portfolio Servicing,
Inc. (SPS) will be the servicer for 69% of the loans and AmWest is
the servicer for 31% of the loans. Nationstar Mortgage, LLC will be
the master servicer.
Distributions of principal and interest (P&I) and loss allocations
are based on a modified sequential payment structure. The
transaction has a stop advance feature where the P&I advancing
party will advance delinquent P&I for up to 180 days.
KEY RATING DRIVERS
Non-Prime Credit Quality (Mixed): The collateral consists of 15-,
30- and 40-year fixed-rate and adjustable-rate loans (31.4% are
adjustable rate); 12.0% of the loans are interest-only (IO) loans
and the remaining 88.0% are fully amortizing loans. The pool is
seasoned approximately eight months in aggregate. The borrowers in
this pool have moderate credit profiles with a 738 weighted average
(WA) Fitch-calculated model FICO and relatively low leverage (75.2%
sustainable loan to value ratio [sLTV]).
As of the cut-off date, no loans are currently delinquent.
Approximately 7.9% of the pool have experienced a delinquency in
the past 24 months (Fitch did not penalize delinquencies related to
servicing transfers or borrowers who experienced a delinquency
while on a coronavirus relief plan that began cash flowing
afterwards). 3.6% of the loans in the pool were underwritten to
foreign national or nonpermanent resident borrowers. The pool
characteristics resemble recent non-prime collateral, and,
therefore, the pool was analyzed using Fitch's non-prime model.
Alternative Documentation Loans (Negative): For approximately 89%
of the loans, alternative documentation was used to underwrite the
loans. Of this, 38.8% were underwritten to a 12-month or 24-month
bank statement program to verify income, which is not consistent
with Appendix Q standards or Fitch's view of a full documentation
program. To reflect the additional risk, Fitch increases the
probability of default (PD) by1.5x on the bank statement loans. The
pool also contains loans a meaningful concentration of loans
underwritten to a WVOE product (22.4%), a DSCR product (12.5%) and
a P&L product (9.5%).
Geographic and Loan Count Concentration (Negative): Approximately
59% of the pool is concentrated in California with moderate MSA
concentration. The largest MSA concentration is in Los Angeles MSA
(35%) followed by the San Francisco MSA (15%) and the Miami MSA
(11%). The top three MSAs account for 61% of the pool. As a result,
there was a 1.17x adjustment for geographic concentration resulting
in a 1.61% penalty at 'AAAsf'.
The pool contains 392 loans with a weighted average (WA) count of
250. As a result, a 1.04x (0.68%) penalty was added to the 'AAAsf'
loss to account for loan concentration.
Modified Sequential Payment Structure with Limited Advancing
(Mixed): The structure distributes principal pro rata among the
senior notes while shutting out the subordinate bonds from
principal until all senior classes are reduced to zero. If a
cumulative loss trigger event, delinquency trigger event or credit
enhancement (CE) trigger event occurs in a given period, principal
will be distributed sequentially to class A-1, A-2 and A-3 notes
until they are reduced to zero.
Advances of delinquent P&I will be made on the mortgage loans for
the first 180 days of delinquency, to the extent such advances are
deemed recoverable. If the servicers fail to make required
advances, the master servicer, Nationstar Mortgage LLC
(Nationstar), will be obligated to make such advance. If the master
servicer fails to make advances, the paying agent (Citibank, N.A.)
will fund advances.
Excess Cash Flow (Positive): The transaction benefits from a
material amount of excess cash flow that provides benefit to the
rated notes before being paid out to class XS notes. The excess is
available to pay timely interest and protect against realized
losses. To the extent the collateral weighted average coupon (WAC)
and corresponding excess are reduced through a rate modification,
Fitch would view the impact as credit-neutral, as the modification
would reduce the borrower's PD, resulting in a lower loss
expectation. As of the closing date, the deal benefits from
approximately 311bps of excess spread.
As a sensitivity to Fitch's rating stresses, Fitch took into
account a WAC deterioration that varied by rating stress. The WAC
cut was derived by assuming a 2.5% cut (based on the most common
historical modification rate) on 40% (historical Alt A modification
%) of the performing loans. Although the WAC reduction stress is
based on historical modification rates, Fitch did not include the
WAC reduction stress in its testing of the delinquency trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut
given the ongoing macro and regulatory environment. A portion of
borrowers will likely be impaired but not ultimately default.
Further, this approach had the largest impact on the backloaded
benchmark scenario, which is also the most probable outcome, as
defaults and liquidations are not likely to be extensive over the
next 12-18 months, given the ongoing borrower relief and eviction
moratoriums.
Updated Economic Risk Factor (Positive): Consistent with the
Additional Scenario Analysis section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to Fitch's macroeconomic baseline scenario or
if actual performance data indicate the current assumptions require
reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data, and the unexpected
development in the health crisis arising from the advancement and
availability of coronavirus vaccines, Fitch reconsidered the
application of the coronavirus-related ERF floors of 2.0 and used
ERF floors of 1.5 and 1.0 for the 'BBsf' and 'Bsf' rating stresses,
respectively. Fitch's "Global Economic Outlook - March 2021" and
related baseline economic scenario forecasts have been revised to
6.2% U.S. GDP growth for 2021 and 3.3% for 2022, following negative
3.5% GDP growth in 2020. Additionally, Fitch's U.S. unemployment
forecasts for 2021 and 2022 are 5.8% and 4.7%, respectively, down
from 8.1% in 2020. These revised forecasts support Fitch reverting
to the 1.5 and 1.0 ERF floors described in its "U.S. RMBS Loan Loss
Model Criteria."
RATING SENSITIVITIES
Fitch's analysis incorporates a sensitivity analysis to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at the MSA level. The implied rating sensitivities are
only an indication of some of the potential outcomes and do not
consider other risk factors that the transaction may become exposed
to or may be considered in the surveillance of the transaction. Two
sets of sensitivity analyses were conducted at the state and
national levels to assess the effect of higher MVDs for the subject
pool.
Factor that could, individually or collectively, lead to a negative
rating action/downgrade:
-- This defined negative stress sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in
addition to the model-projected 39.9% at 'AAAsf'. The analysis
indicates that there is some potential rating migration with
higher MVDs, compared with the model projection.
Factors that could, individually or collectively, lead to a
positive rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to negative MVDs at the national
level, or positive home price growth with no assumed
overvaluation.
-- The analysis assumes positive home price growth of 10.0%.
Excluding the senior classes that are already 'AAAsf', the
analysis indicates there is potential positive rating
migration for all of the rated classes. This section provides
insight into the model-implied sensitivities the transaction
faces when one assumption is modified, while holding others
equal. The modeling process uses the modification of these
variables to reflect asset performance in up and down
environments.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Clayton, SitusAMC, Covius, Evolve, Consolidated
Analytics, Recovco, Digital Risk, Opus and NDA. The third-party due
diligence described in Form 15E focused on credit, compliance,
valuation and data integrity. The review scope was consistent with
Fitch's criteria and the overall diligence grades are in-line with
prior Non-QM transactions that Fitch has rated. The results
indicate sound origination quality with no incidence of material
defects. Fitch considered this information in its analysis.
99% of the loans received a final grade of 'A' or 'B' which
indicates strong origination processes with no presence of material
defects. Approximately 30% of loans received a final grade of 'B'
for immaterial exceptions that were mitigated with strong
compensating factors or were largely accounted for in Fitch's loan
loss model. Fitch applied a credit for the high percentage of loan
level due diligence, which reduced the AAAsf loss expectation by
44bps.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CSWF 2021-SOP2: S&P Assigns B- (sf) Rating on Class F Certificates
------------------------------------------------------------------
S&P Global Ratings assigned ratings to CSWF 2021-SOP2's commercial
mortgage pass-through certificates. At the same time, S&P withdrew
its preliminary ratings on the class X-CP and X-NCP certificates
because they are not entitled to excess interest.
S&P said, "Since the issuance of our preliminary ratings on June
21, the mortgage loan's spread increased to 2.70% from 2.50%. This
resulted in an S&P Global Ratings' debt service coverage (DSC)
ratio of 1.23x, based on the LIBOR cap of 2.50% plus the spread and
S&P Global Ratings' net cash flow. Our DSC ratio, based on the
spread plus the current LIBOR rate of 0.08%, is 2.41x."
The note issuance is a CMBS transaction backed by a two-year,
floating-rate, interest-only commercial mortgage loan totaling
$335.0 million that matures on June 9, 2023. The transaction has
three 12-month extension options.
The ratings reflect S&P's view of the collateral's historical and
projected performance, the sponsor's and managers' experience, the
trustee-provided liquidity, the loan terms, and the transaction
structure.
Ratings Assigned(i)
CSWF 2021-SOP2
Class A, $126,330,000: AAA (sf)
Class X-CP, $101,064,000(ii): Not rated
Class X-NCP, $126,330,000(ii): Not rated
Class B, $28,080,000: AA- (sf)
Class C, $21,060,000: A- (sf)
Class D, $25,830,000: BBB- (sf)
Class E, $35,090,000: BB- (sf)
Class F, $33,970,000: B- (sf)
Class G, $47,890,000: Not rated
HRR(iii), $16,750,000: Not rated
(i)The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933.
(ii)Notional balance. The notional amount of the class X-CP
certificates will equal the outstanding principal balance of the
A-2 portion of the class A certificates and will be zero after the
distribution date in June 2022. The notional amount of the class
X-NCP certificates will equal the certificate balance of the class
A certificates.
(iii)Non-offered horizontal risk retention certificates.
HRR--Horizontal risk retention.
DBJPM 2016-C1: DBRS Lowers Class F Certs Rating to CCC
------------------------------------------------------
DBRS Limited downgraded the following rating on the Commercial
Mortgage Pass-Through Certificates, Series 2016-C1 issued by DBJPM
2016-C1 Mortgage Trust:
-- Class F to CCC (sf) from B (low) (sf)
DBRS Morningstar also confirmed the ratings on the following
classes:
-- Class A-3A at AAA (sf)
-- Class A-3B at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class X-C at BB (high) (sf)
-- Class D at BB (sf)
-- Class X-D at B (high) (sf)
-- Class E at B (sf)
-- Class X-E at B (low) (sf)
-- Class G at CCC (sf)
The trends on Classes D, E, X-C, X-D, and X-E are Negative. DBRS
Morningstar changed the trends on Classes C and X-B to Stable from
Negative. Classes F and G have ratings that do not carry trends.
All other trends are Stable. DBRS Morningstar also maintained the
Interest in Arrears designation on Classes E, F, and G.
The downgrade and Negative trends resulted primarily from the
anticipated losses to the trust for certain loans in special
servicing as of the June 2021 remittance, which collectively
represented 11.8% of the pool balance. DBRS Morningstar expects the
losses to be concentrated with the largest of these loans, Sheraton
North Houston (Prospectus ID#4, 5.1% of the pool), as further
discussed below. Although the outlook for the Sheraton North
Houston loan and others in special servicing has deteriorated since
the January 2021 DBRS Morningstar review of this transaction, when
four classes were downgraded and eight classes had Negative trends,
there have been some positive developments since that time. In
January 2021, Hagerstown Premium Outlets loan (Prospectus ID#12,
3.9% of the pool) was in special servicing; however, as
anticipated, the loan transferred back to the master servicer in
May 2021. Additionally, 600 Broadway (Prospectus ID#6, 2.3% of the
pool) was approved for a third loan modification that included a
curtailment payment in excess of $20.0 million that was applied as
of the June 2021 remittance.
The pool has a significant concentration in retail and hospitality
properties, representing 36.1% and 17.2% of the pool balance,
respectively, with many of those loans currently on the servicer's
watchlist. These property types have been the most severely
affected by the effects of the Coronavirus Disease (COVID-19)
pandemic and, as such, these concentrations suggest increased risks
for the trust, particularly for the non-investment-grade classes,
since issuance.
As of the June 2021 remittance, 32 of the original 33 loans
remained in the pool, with a collateral reduction since issuance of
10.9% because of scheduled amortization and the curtailment payment
for the 600 Broadway loan. There are 10 loans, representing 26.3%
of the pool, on the servicer's watchlist. These loans are being
monitored for various reasons including low debt service coverage
ratios, occupancy-related issues, pandemic-related forbearance
requests, and two non-credit-related transfers.
Four loans, representing 11.8% of the pool, are with the special
servicer. The largest, the Sheraton North Houston loan, is secured
by a 419-key full-service hotel in Houston. The hotel has failed to
generate cash flow in line with the Issuer's expectations following
the loss of a large contract with United Airlines after the airline
moved its pilot training facility to Denver in 2017. The hotel was
able to recover some of the lost room revenue with a contract for a
smaller airline for a small portion of the rooms previously under
contract with United Airlines, but the difficult environment for
Houston hotels amid oversupply issues and falling demand for some
that has coincided with the sustained declines in the energy sector
made a full recovery significantly more difficult. The effects of
the coronavirus pandemic compounded these factors, and the loan was
transferred to special servicing in November 2020.
The borrower has advised the servicer that cash flow shortfalls
will no longer be funded and the special servicer has initiated
proceedings to install a receiver. A March 2021 appraisal was
provided that valued the collateral at $56.0 million on an as-is
basis relative to its issuance value of $68.0 million. Although the
value decline is relatively moderate and suggests value outside of
the loan balance, DBRS Morningstar notes that 2020 appraisals for
several other troubled Houston hotels reported declines in values
of up to 65% when compared with their issuance appraisal values.
Given these trends and the cash flow declines for the hotel that
preceded the pandemic, DBRS Morningstar assumed a conservative
haircut to the March 2021 appraisal in its loss scenario for this
loan.
The 600 Broadway loan transferred back to special servicing in
March 2021, with the special servicer evaluating the borrower's
proposal for a third loan modification at the time the loan was
transferred. The tenants were permitted to go dark as part of a
2019 loan modification, and the property has been vacant for
several years following the store closures. In early 2021, the
borrower reached an agreement with the tenant to terminate the
leases with a lease termination fee in excess of $60.0 million. The
termination was ultimately approved by the special servicer and
termination funds will be used to fund principal curtailments and
to fund a debt service reserve of $2.5 million. In addition, all
but $3.5 million of the prepayment premium will be waived on the
condition that the borrower pay off the entirety of the subject
loan within 120 days of the loan modification closing.
As previously mentioned, a curtailment payment in excess of $20.0
million was applied to the trust with the June 2021 remittance. The
borrower has secured two new tenants, Konrad Group (39.2% of total
net rentable area; lease expiry January 2033) and Target Corp.
(35.7% of net rentable area; lease expiry January 2038), with each
tenant paying $113 per square foot (psf) and $112 psf,
respectively. These rents compare with the base rents for the
Abercrombie & Fitch tenants of $158 psf as of issuance. Target
Corp. is expected to take occupancy in the summer of 2021 and will
be in a free rent period until April 2022. Konrad Group is
currently paying rent at the subject. As of July 2020 the
collateral was valued at $49.9 million on an as-is basis compared
with its issuance value of $220.0 million; however, the leasing
activity has likely increased the as-is value significantly, a
factor that combines with the scheduled principal curtailments and
debt service reserve collections to significantly reduce the risk
to the trust for this loan.
At issuance, DBRS Morningstar assigned an investment-grade shadow
rating on two loans, 787 Seventh Avenue (Prospectus ID #1, 11.0% of
the pool) and 225 Liberty Street (Prospectus ID #5, 5.6% of the
pool). DBRS Morningstar confirmed that the performances of these
loans remain consistent with investment-grade loan
characteristics.
DBRS Morningstar materially deviated from its North American CMBS
Insight Model when determining the ratings assigned to Classes B
and C, as the quantitative results suggested a lower rating on
these classes. The material deviation is warranted given the
uncertain loan-level event risk.
Notes: All figures are in U.S. dollars unless otherwise noted.
DELTA AIR 2015-1: S&P Lowers Class B Certs Rating to BB+(sf)
------------------------------------------------------------
S&P Global Ratings revised its issue-level ratings on two Delta Air
Lines Inc. enhanced equipment trust certificates (EETCs) following
a review prompted by our publication of new criteria for rating
such issues. S&P removed its "under criteria observation" (UCO)
indicator from the affected ratings.
S&P said, "Our analysis of equipment trust certificate (ETC) or
EETC ratings under the new criteria typically starts with our
issuer credit rating (ICR) on the airline that operates the
aircraft and adds any applicable notches for the likelihood that an
airline will successfully reorganize in bankruptcy and continue to
make payments on the ETC or EETC (which we call "affirmation
credit"). We may adjust--by reducing those notches--for any adverse
legal considerations that may arise from the jurisdiction in which
the airline operates. For EETCs, we may also add notches for the
likelihood that repossession and sale of the aircraft collateral
will be sufficient to repay the EETC's principal and accrued
interest, avoiding a default, if the airline does not reorganize or
rejects the aircraft securing the certificates (which we call
"collateral credit")."
The rating actions on Delta EETCs consisted of a one-notch upgrade
and a one-notch downgrade. S&P's upgrade of the 2015-1A
certificates, where its criteria suggest that we focus on LTV using
appraised base value, rather than a combination of base and current
market value, in this case, resulted in additional collateral
credit.
S&P said, "Our downgrade of the 2015-1B certificates is because our
new criteria limit assigning affirmation credit when the LTV is
fairly high (more than 85%), as it is for this issue. This is
because of the increased risk that an airline in bankruptcy would
seek to renegotiate payment terms with creditors with weak
collateral coverage. Accordingly, we lower affirmation credit to
one notch from two."
Two other EETCs that S&P had placed under criteria observation on
May 26, the 2002-G1 and 2007-1A certificates, have since been
redeemed by Delta.
Ratings List
DELTA AIR LINES INC.
Issuer Credit Rating BB/Negative--
RATINGS LOWERED
TO FROM
Equipment Trust Certificates
4.25% 2015-1 Class B BB+(sf) BBB-(sf)
RATINGS RAISED
TO FROM
Equipment Trust Certificates
3.875% 2015-1 Class A A-(sf) BBB+(sf)
DRYDEN 87: S&P Assigns Prelim. BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Dryden 87
CLO Ltd./Dryden 87 CLO LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by PGIM Inc.
The preliminary ratings are based on information as of June 25,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Dryden 87 CLO Ltd./Dryden 87 CLO LLC
Class A-1, $366.00 million: AAA (sf)
Class A-2, $12.00 million: AAA (sf)
Class B, $78.00 million: AA (sf)
Class C (deferrable), $36.00 million: A (sf)
Class D (deferrable), $36.00 million: BBB- (sf)
Class E (deferrable), $24.00 million: BB- (sf)
Subordinated notes, $53.53 million: Not rated
ELEVATION CLO 2021-13: S&P Assigns Prelim 'BB-' Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elevation
CLO 2021-13 Ltd./Elevation CLO 2021-13 LLC's floating-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of June 24,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Elevation CLO 2021-13 Ltd./Elevation CLO 2021-13 LLC
Class X, $3.00 million: AAA (sf)
Class A-1, $250.10 million: AAA (sf)
Class A-2, $12.30 million: AAA (sf)
Class B, $49.20 million: AA (sf)
Class C-1 (deferrable), $19.60 million: A (sf)
Class C-2 (deferrable), $5.00 million: A (sf)
Class D-1 (deferrable), $18.45 million: BBB+ (sf)
Class D-2 (deferrable), $6.15 million: BBB- (sf)
Class E (deferrable), $14.35 million: BB- (sf)
Subordinated notes, $41.05 million: Not rated
ELMWOOD CLO IX: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
IX Ltd./Elmwood CLO IX LLC's floating-rate debt.
The debt issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of June 30,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Elmwood CLO IX Ltd./Elmwood CLO IX LLC
Class A-L(i), $142.0 million: AAA (sf)
Class A, $141.5 million: AAA (sf)
Class B, $58.5 million: AA (sf)
Class C (deferrable), $27.0 million: A (sf)
Class D (deferrable), $27.0 million: BBB- (sf)
Class E (deferrable), $18.0 million: BB- (sf)
Subordinated notes, $46.6 million: Not rated
(i)The class A-L debt will be issued in loan form and have the
ability to be converted into class A notes.
FIRSTKEY HOMES 2021-SFR1: DBRS Gives Prov. BB Rating on 2 Classes
-----------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Single-Family Rental Pass-Through Certificates to be issued by
FirstKey Homes 2021-SFR1 Trust:
-- $867.9 million Class A at AAA (sf)
-- $183.9 million Class B at AA (sf)
-- $143.7 million Class C at A (sf)
-- $166.7 million Class D at BBB (high) (sf)
-- $126.4 million Class E-1 at BBB (sf)
-- $97.7 million Class E-2 at BBB (low) (sf)
-- $103.5 million Class F-1 at BB (sf)
-- $57.5 million Class F-2 at BB (sf)
-- $46.0 million Class F-3 at BB (low) (sf)
-- $46.0 million Class G at B (high) (sf)
-- $224.1 million Class E at BBB (low) (sf)
-- $206.9 million Class F at BB (low) (sf)
The AAA (sf) rating on the Class A Certificates reflects 58.1% of
credit enhancement provided by subordinated notes in the pool. The
AA (sf), A (sf), BBB (high) (sf), BBB (sf), BBB (low) (sf), BB
(sf), BB (low) (sf), and B (high) (sf) ratings reflect 49.2%,
42.2%, 34.2%, 28.1%, 23.3% 18.3%, 15.6%, 13.3%, and 11.1% of credit
enhancement, respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
The Certificates are supported by the income streams and values
from 9,238 rental properties. The properties are distributed across
16 states and 42 metropolitan statistical areas (MSAs) in the U.S.
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 value, 56.5% of the portfolio is concentrated in three
states: Florida (29.0%), Georgia (16.2%), and North Carolina
(11.3%). The average value is $248,858. The average age of the
properties is roughly 30 years. The majority of the properties have
three or more bedrooms. The certificates represent a beneficial
ownership in an approximately five-year, fixed-rate, interest-only
loan with an initial aggregate principal balance of approximately
$2.1 billion.
DBRS Morningstar assigned the provisional ratings for 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 flows (NCFs) 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.
Notes: All figures are in U.S. dollars unless otherwise noted.
FLAGSTAR MORTGAGE 2021-4: DBRS Finalizes B Rating on Cl. B-5 Certs
------------------------------------------------------------------
DBRS, Inc. finalized the following provisional ratings on the
Mortgage Pass-Through Certificates, Series 2021-4 (the
Certificates) issued by Flagstar Mortgage Trust 2021-4 (FSMT
2021-4) as follows:
-- $637.9 million Class A-1 at AAA (sf)
-- $637.9 million Class A-2 at AAA (sf)
-- $382.8 million Class A-3 at AAA (sf)
-- $382.8 million Class A-4 at AAA (sf)
-- $478.5 million Class A-5 at AAA (sf)
-- $478.5 million Class A-6 at AAA (sf)
-- $510.4 million Class A-7 at AAA (sf)
-- $510.4 million Class A-8 at AAA (sf)
-- $95.7 million Class A-9 at AAA (sf)
-- $95.7 million Class A-10 at AAA (sf)
-- $31.9 million Class A-11 at AAA (sf)
-- $31.9 million Class A-12 at AAA (sf)
-- $127.6 million Class A-13 at AAA (sf)
-- $127.6 million Class A-14 at AAA (sf)
-- $127.6 million Class A-15 at AAA (sf)
-- $127.6 million Class A-16 at AAA (sf)
-- $159.5 million Class A-17 at AAA (sf)
-- $159.5 million Class A-18 at AAA (sf)
-- $255.2 million Class A-19 at AAA (sf)
-- $255.2 million Class A-20 at AAA (sf)
-- $78.1 million Class A-21 at AAA (sf)
-- $78.1 million Class A-22 at AAA (sf)
-- $716.0 million Class A-23 at AAA (sf)
-- $716.0 million Class A-24 at AAA (sf)
-- $716.0 million Class A-X-1 at AAA (sf)
-- $638.0 million Class A-X-2 at AAA (sf)
-- $382.8 million Class A-X-4 at AAA (sf)
-- $478.5 million Class A-X-6 at AAA (sf)
-- $510.4 million Class A-X-8 at AAA (sf)
-- $95.7 million Class A-X-10 at AAA (sf)
-- $31.9 million Class A-X-12 at AAA (sf)
-- $127.6 million Class A-X-14 at AAA (sf)
-- $127.6 million Class A-X-16 at AAA (sf)
-- $159.5 million Class A-X-18 at AAA (sf)
-- $255.2 million Class A-X-20 at AAA (sf)
-- $78.1 million Class A-X-22 at AAA (sf)
-- $12.8 million Class B-1 at AA (high) (sf)
-- $12.8 million Class B-1-A at AA (high) (sf)
-- $12.8 million Class B-1-X at AA (high) (sf)
-- $9.0 million Class B-2 at A (sf)
-- $9.0 million Class B-2-A at A (sf)
-- $9.0 million Class B-2-X at A (sf)
-- $5.6 million Class B-3 at BBB (sf)
-- $5.6 million Class B-3-A at BBB (sf)
-- $5.6 million Class B-3-X at BBB (sf)
-- $2.3 million Class B-4 at BB (sf)
-- $1.5 million Class B-5 at B (sf)
-- $27.4 million Class B at BBB (sf)
-- $27.4 million Class B-X at BBB (sf)
Classes A-X-1, A-X-2, A-X-4, A-X-6, A-X-8, A-X-10, A-X-12, A-X-14,
A-X-16, A-X-18, A-X-20, A-X-22, B-1-X, B-2-X, B-3-X, and B-X are
interest-only (IO) certificates. The class balances represent
notional amounts.
Classes A-1, A-2, A-3, A-5, A-6, A-7, A-8, A-9, A-11, A-13, A-14,
A-15, A-17, A-18, A-19, A-20, A-21, A-23, A-24, A-X-2, A-X-6,
A-X-8, A-X-14, A-X-18, A-X-20, B-1, B-2, B-3, B, and B-X are
exchangeable certificates. These classes can be exchanged for
combinations of exchange certificates as specified in the offering
documents.
Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11¬,
A-12, A-13, A-14, A-15, A-16, A-17, A-18, A-19, and A-20
certificates are super-senior certificates. These classes benefit
from additional protection from the senior support certificates
(Classes A-21 and A-22) with respect to loss allocation.
The AAA (sf) ratings on the Certificates reflect 4.60% of credit
enhancement provided by subordinated certificates. The AA (high)
(sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 2.90%,
1.70%, 0.95%, 0.65%, and 0.45% of credit enhancement,
respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
This securitization is a portfolio of first-lien, fixed-rate, prime
conventional mortgages funded by the issuance of the Certificates.
The Certificates are backed by 827 loans with a total principal
balance of $750,541,231 as of the Cut-Off Date (June 1, 2021).
Flagstar Bank, FSB (Flagstar) is the originator and servicer of all
mortgage loans and the sponsor of the transaction. Wells Fargo
Bank, N.A. (Wells Fargo, rated AA with a Negative trend by DBRS
Morningstar) will act as the Master Servicer, Securities
Administrator, and Custodian. Wilmington Savings Fund Society, FSB
will serve as Trustee. PentAlpha Surveillance LLC (PentAlpha) will
act as the Reviewer.
The pool consists of fully amortizing fixed-rate mortgages with
original terms to maturity of 30 years. Approximately 6.0% of the
pool are agency eligible mortgage loans that were eligible for
purchase by Fannie Mae or Freddie Mac. Details on the underwriting
of conforming loans can be found in the Key Probability of Default
Drivers section of the related Rating Report.
The transaction employs a senior-subordinate, shifting-interest
cash flow structure that is enhanced from a pre-crisis structure.
For this transaction, the servicing fee payable to the Servicer
comprises three separate components: the base servicing fee, the
aggregate delinquent servicing fee, and the aggregate incentive
servicing fee. These fees vary based on the delinquency status of
the related loan and will be paid from interest collections before
distribution to the securities. The base servicing fee will reduce
the Net weighted-average coupon (WAC) payable to certificateholders
as part of the aggregate expense calculation. However, except for
the Class B-6-C Net WAC, the delinquent and incentive servicing
fees will not be included in the reduction of Net WAC and will thus
reduce available funds entitled to the certificateholders. To
capture the impact of such potential fees, DBRS Morningstar ran
additional cash flow stresses based on its 60+-day delinquency and
default curves, as detailed in the Cash Flow Analysis section of
this report.
As of the Cut-Off Date, none of the loans are currently subject to
a Coronavirus Disease (COVID-19)-related forbearance plan. In the
event a borrower requests or enters into a coronavirus-related
forbearance plan after the Cut-Off Date but prior to the Closing
Date, the Sponsor will remove such loan from the mortgage pool and
remit the related Closing Date substitution amount. Loans that
enter a coronavirus-related forbearance plan after the Closing Date
will remain in the pool.
CORONAVIRUS IMPACT
The coronavirus pandemic and the resulting isolation measures have
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. DBRS Morningstar saw increases in delinquencies for many
residential mortgage-backed securities (RMBS) asset classes,
shortly after the onset of coronavirus.
Such mortgage delinquencies were mostly in the form of forbearance,
which are generally short-term payment reliefs that may perform
very differently from traditional delinquencies. At the onset of
coronavirus, because the option to forebear mortgage payments was
so widely available, it drove forbearance to a very high level.
When the dust settled, coronavirus-induced forbearance in 2020
performed better than expected, thanks to government aid, low
loan-to-value ratios (LTVs), and good underwriting in the mortgage
market in general. Across nearly all RMBS asset classes,
delinquencies have been gradually trending down in recent months as
forbearance period comes to an end for many borrowers.
In connection with the economic stress assumed under its moderate
scenario (see "Global Macroeconomic Scenarios: June 2021 Update,"
published on June 18, 2021), DBRS Morningstar may assume higher
loss expectations for pools with loans on forbearance plans.
Notes: All figures are in U.S. dollars unless otherwise noted.
FLAGSTAR MORTGAGE 2021-4: Fitch Rates Class B-5 Certs 'Bsf'
-----------------------------------------------------------
Fitch Ratings has assigned ratings to the residential
mortgage-backed certificates (RMBS) issued by Flagstar Mortgage
Trust 2021-4 (FSMT 2021-4).
DEBT RATING PRIOR
---- ------ -----
FSMT 2021-4
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-X-1 LT AAAsf New Rating AAA(EXP)sf
A-X-10 LT AAAsf New Rating AAA(EXP)sf
A-X-12 LT AAAsf New Rating AAA(EXP)sf
A-X-14 LT AAAsf New Rating AAA(EXP)sf
A-X-16 LT AAAsf New Rating AAA(EXP)sf
A-X-18 LT AAAsf New Rating AAA(EXP)sf
A-X-2 LT AAAsf New Rating AAA(EXP)sf
A-X-20 LT AAAsf New Rating AAA(EXP)sf
A-X-22 LT AAAsf New Rating AAA(EXP)sf
A-X-4 LT AAAsf New Rating AAA(EXP)sf
A-X-6 LT AAAsf New Rating AAA(EXP)sf
A-X-8 LT AAAsf New Rating AAA(EXP)sf
B LT BBBsf New Rating BBB(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-1-A LT AAsf New Rating AA(EXP)sf
B-1-X LT AAsf New Rating AA(EXP)sf
B-2 LT Asf New Rating A(EXP)sf
B-2-A LT Asf New Rating A(EXP)sf
B-2-X LT Asf New Rating A(EXP)sf
B-3 LT BBBsf New Rating BBB(EXP)sf
B-3-A LT BBBsf New Rating BBB(EXP)sf
B-3-X LT BBBsf New Rating BBB(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT Bsf New Rating B(EXP)sf
B-6-C LT NRsf New Rating NR(EXP)sf
B-X LT BBBsf New Rating BBB(EXP)sf
LT-R LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch rates the residential mortgage-backed certificates issued by
Flagstar Mortgage Trust 2021-4 (FSMT 2021-4) as indicated above.
The certificates are supported by 827 newly originated fixed-rate
prime quality first liens on one- to four-family residential homes
and condominiums. The pool consists of both non-agency jumbo and
agency eligible mortgage loans. The total balance of these loans is
approximately $750.54 million as of the cutoff date. This is the
16th post-financial crisis issuance from Flagstar Bank, FSB
(Flagstar).
The pool comprises loans that Flagstar originated through its
retail, broker and correspondent channels. The transaction is
similar to previous Fitch-rated prime transactions, with a standard
senior-subordinate, shifting-interest deal structure. 100% of the
loans in the pool were underwritten to the Ability to Repay (ATR)
rule and qualify as Safe Harbor, Rebuttable Presumption, or
Temporary qualified mortgages (SHQM, HPQM and TQM, respectively).
Flagstar (RPS2-/Negative) will be the servicer, and Wells Fargo
Bank, N.A. (RMS1-/Negative) will be the master servicer.
The collateral and the structure are very similar to prior FSMT
transactions that Fitch has rated.
On April 26, 2021, New York Community Bancorp, Inc. and Flagstar
Bancorp, Inc. jointly announced their planned merger, which is
anticipated to take place by YE21; this announcement had no impact
on the analysis of this transaction.
KEY RATING DRIVERS
High-Quality Prime Mortgage Pool (Positive): The pool consists of
very high-quality 30-year fixed-rate fully amortizing loans to
prime quality borrowers. The loans were made to borrowers with
strong credit profiles, relatively low leverage and large liquid
reserves. The loans are seasoned at an average of four months,
according to Fitch (three months per the transaction documents).
The pool has a weighted average (WA) original FICO score of 773 and
30.9% DTI (as determined by Fitch), which is indicative of very
high credit quality borrower.
Approximately 80.4% of the loans have a borrower with an original
FICO score at or above 750. In addition, the original WA combined
loan-to-value ratio (CLTV) of 63.7%, translating to a sustainable
loan-to-value ratio (sLTV) of 69.3%, represents substantial
borrower equity in the property and reduced default risk.
The pool consists of 96.0% of loans where the borrower maintains a
primary residence, while 4.0% is a second home. Single-family homes
comprise 94.6% of the pool, and condominiums make up 3.5%. Cashout
refinances comprise 13.0% of the pool, purchases, 28.2%, and
rate-term refinances, 58.8%. Of the loans, 94.0% are
non-conforming. while 6.0% are conforming loans. All of the loans
were originated through a retail channel.
A total of 220 loans in the pool are over $1 million, and the
largest loan is $2.5 million.
No loans in the pool were made to foreign nationals/nonpermanent
residents. Fitch viewed this as a positive attribute for the
transaction.
Shifting Interest Structure and Full Servicer Advancing (Mixed):
The mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. The lockout feature helps maintain subordination for a
longer period should losses occur later in the life of the deal.
The applicable credit support percentage feature redirects
subordinate principal to classes of higher seniority if specified
credit enhancement (CE) levels are not maintained.
The servicer, Flagstar (RPS2-/Negative), will provide full
advancing for the life of the transaction. Although full P&I
advancing will provide liquidity to the certificates, it will also
increase the loan-level loss severity (LS) since the servicer looks
to recoup P&I advances from liquidation proceeds, which results in
less recoveries. Wells Fargo Bank (servicer rating of
RMS1-/Negative; IDR: AA-/ Negative) is the master servicer in this
transaction and will advance delinquent P&I on the loans if
Flagstar is not able to.
Subordination Floor (Positive): A credit enhancement or senior
subordination floor of 0.70% has been considered to mitigate
potential tail-end risk and loss exposure for senior tranches as
the pool size declines and performance volatility increases due to
adverse loan selection and small loan count concentration.
Additionally, a junior subordination floor of 0.50% has been
considered to mitigate potential tail-end risk and loss exposure
for subordinate tranches as the pool size declines and performance
volatility increases due to adverse loan selection and small loan
count concentration.
Updated Economic Risk Factor (Positive): Consistent with the
"Additional Scenario Analysis" section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to Fitch's macroeconomic baseline scenario or
if actual performance data indicates the current assumptions
require reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data, and the unexpected
development in the health crisis arising from the advancement and
availability of COVID-19 vaccines, Fitch reconsidered the
application of the coronavirus-related ERF floors of 2.0 and used
ERF Floors of 1.5 and 1.0 for the 'BBsf' and 'Bsf' rating stresses,
respectively. Fitch's March 2021 Global Economic Outlook and
related base-line economic scenario forecasts have been revised to
a 6.2% U.S. GDP growth for 2021 and 3.3% for 2022 following a -3.5%
GDP growth in 2020.
Additionally, Fitch's U.S. unemployment forecasts for 2021 and 2022
are 5.8% and 4.7%, respectively, which is down from 8.1% in 2020.
These revised forecasts support Fitch reverting back to the 1.5 and
1.0 ERF floors described in Fitch's "U.S. RMBS Loan Loss Model
Criteria."
The B-5 certificates passed Fitch's 'BBsf' stresses, however the
committee decided to assign a 'Bsf' rating to the class due to its
position in the capital structure and tranche size.
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 40.1% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Canopy Financial Technology Partners, LLC. The
third-party due diligence described in Form 15E focused on credit,
compliance, property valuation and data integrity. Fitch considered
this information in its analysis. Fitch applied an adjustment to
losses based on the unreviewed population of the pool as described
below. A credit was given to loans that received a due diligence
review, which decreased Fitch's loss expectations by 5bps at the
'AAAsf' rating stress.
The sample was determined by a statistically significant selection
methodology based on a 95% confidence level with a 5% error rate.
Flagstar adopted this methodology in 2019 when it had previously
selected loans for review at a fixed rate. For loans that were
reviewed, the diligence scope consisted of a review of credit,
regulatory compliance, property valuation and data integrity. Both
the sample size and review scope are consistent with Fitch criteria
for diligence sampling.
100% of the loans in the review sample received a final diligence
grade of 'A' or 'B' and the results did not indicate material
defects. The sample exhibited strong adherence to underwriting
guidelines as approximately 98% of loans received a final credit
grade of 'A'.
The sample had a low concentration of compliance 'B' exceptions
(3.8%) compared with the average prime jumbo non-agency
transactions (46%). Approximately 0.5% of loans in the sample had
initial TRID exceptions graded 'C' that were ultimately cured to a
'B' by Flagstar through the re-issuance of post-closing
documentation. While Fitch does not typically adjust its loss
expectations for compliance 'B' exceptions, due diligence was only
performed on 32% of the initial pool, which led Fitch to
extrapolate the findings to the remainder of the pool.
Since more than half of the pool did not receive due diligence,
Fitch assumed that 0.5% of the non-reviewed loans have potential
TRID exceptions that would be identified as material and not cured
with post-closing documentation. Fitch applies a standard loss
adjustment of $15,500 to the loss amount for material TRID
exceptions as these loans can carry an increased risk of statutory
damages. However, the aggregate loss severity adjustment was
negligible at the 'AAAsf' level, and Fitch did not make any further
adjustments to the model output.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on approximately 32% of the pool. The third-party due
diligence was generally consistent with Fitch's "U.S. RMBS Rating
Criteria," and Canopy Financial Technology Partners, LLC was
engaged to perform the review. Loans reviewed under this engagement
were given compliance, credit and valuation grades, and assigned
initial grades for each subcategory. Minimal exceptions and waivers
were noted in the due diligence reports. Refer to the Third-Party
Due Diligence section for more detail.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered to be
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
FLAGSTAR MORTGAGE 2021-5INV: Moody's Rates Class B-5 Certs 'B3'
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
forty-eight classes of residential mortgage-backed securities
issued by Flagstar Mortgage Trust 2021-5INV ("FSMT 2021-5INV"). The
ratings range from Aaa (sf) to B3 (sf).
Flagstar Mortgage Trust 2021-5INV (FSMT 2021-5INV) is the fifth
issue from Flagstar Mortgage Trust in 2021 and the second issue
with investor-property loans in 2021. Flagstar Bank, FSB (Flagstar)
is the sponsor of the transaction. FSMT 2021-5INV is a
securitization of GSE eligible first-lien investment property
mortgage loans. 100.0% of the pool by loan balance were originated
by Flagstar Bank, FSB.
All the loans are underwritten in accordance with Freddie Mac or
Fannie Mae guidelines, which take into consideration, among other
factors, the income, assets, employment and credit score of the
borrower as well as loan-to-value (LTV). These loans were run
through one of the government-sponsored enterprises' (GSE)
automated underwriting systems (AUS) and received an "Approve" or
"Accept" recommendation.
All of the personal-use loans are "qualified mortgages" under
Regulation Z as result of the temporary provision allowing
qualified mortgage status for loans eligible for purchase,
guaranty, or insurance by Fannie Mae and Freddie Mac (and certain
other federal agencies). If the Sponsor or the Reviewer determines
a Personal Use Loan is no longer a "qualified mortgage" under the
ATR Rules, the Sponsor will be required to repurchase such Personal
Use Loan. With the exception of personal-use loans, all other
mortgage loans in the pool are not subject to TILA because each
such mortgage loan is an extension of credit primarily for a
business purpose and is not a "covered transaction" as defined in
Section 1026.43(b)(1) of Regulation Z.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. Moody's also compared the
collateral pool to other prime jumbo securitizations. Overall, this
pool has average credit risk profile as compared to that of recent
prime jumbo transactions. The securitization has a shifting
interest structure with a five-year lockout period that benefits
from a senior floor and a subordinate floor. Moody's coded the cash
flow to each of the certificate classes using Moody's proprietary
cash flow tool.
In this transaction, the Class A-11 notes' coupon is indexed to
SOFR. In addition, the coupon on Class A-11X is also impacted by
changes in SOFR. However, based on the transaction's structure, the
particular choice of benchmark has no credit impact. First,
interest payments to the notes, including the floating rate notes,
are subject to the net WAC cap, which prevents the floating rate
notes from incurring interest shortfalls as a result of increases
in the benchmark index above the fixed rates at which the assets
bear interest. Second, the shifting-interest structure pays all
interest generated on the assets to the bonds and does not provide
for any excess spread.
Issuer: Flagstar Mortgage Trust 2021-5INV
Cl. A-1, Assigned Aaa (sf)
Cl. A-2, Assigned Aaa (sf)
Cl. A-3, Assigned Aaa (sf)
Cl. A-4, Assigned Aaa (sf)
Cl. A-5, Assigned Aaa (sf)
Cl. A-6, Assigned Aaa (sf)
Cl. A-7, Assigned Aaa (sf)
Cl. A-8, Assigned Aaa (sf)
Cl. A-9, Assigned Aaa (sf)
Cl. A-10, Assigned Aaa (sf)
Cl. A-11, Assigned Aaa (sf)
Cl. A-12, Assigned Aaa (sf)
Cl. A-13, Assigned Aaa (sf)
Cl. A-14, Assigned Aaa (sf)
Cl. A-15, Assigned Aaa (sf)
Cl. A-16, Assigned Aa1 (sf)
Cl. A-17, Assigned Aa1 (sf)
Cl. A-18, Assigned Aaa (sf)
Cl. A-19, Assigned Aaa (sf)
Cl. A-20, Assigned Aaa (sf)
Cl. A-21, Assigned Aaa (sf)
Cl. A-22, Assigned Aaa (sf)
Cl. A-23, Assigned Aa1 (sf)
Cl. A-24, Assigned Aa1 (sf)
Cl. A-X-1*, Assigned Aa1 (sf)
Cl. A-X-4*, Assigned Aaa (sf)
Cl. A-X-6*, Assigned Aaa (sf)
Cl. A-X-8*, Assigned Aaa (sf)
Cl. A-X-10*, Assigned Aaa (sf)
Cl. A-11X*, Assigned Aaa (sf)
Cl. A-X-13*, Assigned Aaa (sf)
Cl. A-X-15*, Assigned Aaa (sf)
Cl. A-X-16*, Assigned Aa1 (sf)
Cl. A-X-17*, Assigned Aa1 (sf)
Cl. A-X-19*, Assigned Aaa (sf)
Cl. A-X-20*, Assigned Aaa (sf)
Cl. A-X-22*, Assigned Aaa (sf)
Cl. A-X-24*, Assigned Aa1 (sf)
Cl. B-1, Assigned Aa3 (sf)
Cl. B-1-A, Assigned Aa3 (sf)
Cl. B-1-X*, Assigned Aa3 (sf)
Cl. B-2, Assigned A2 (sf)
Cl. B-2-A, Assigned A2 (sf)
Cl. B-2-X*, Assigned A2 (sf)
Cl. B-3, Assigned Baa2 (sf)
Cl. B-4, Assigned Ba2 (sf)
Cl. B-5, Assigned B3 (sf)
Cl. RR-A, Assigned Aaa (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario is 0.94%
at the mean, 0.66% at the median, and reaches 6.72% at a stress
level consistent with Moody's Aaa ratings.
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of consumer assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's increased its model-derived median expected losses by 10%
(7.6% for the mean) and Moody's Aaa losses by 2.5% to reflect the
likely performance deterioration resulting from a slowdown in US
economic activity in 2020 due to the coronavirus outbreak. These
adjustments are lower than the 15% median expected loss and 5% Aaa
loss adjustments Moody's made on pools from deals issued after the
onset of the pandemic until February 2021. Moody's reduced
adjustments reflect the fact that the loan pool in this deal does
not contain any loans to borrowers who are not currently making
payments. For newly originated loans, post-COVID underwriting takes
into account the impact of the pandemic on a borrower's ability to
repay the mortgage. For seasoned loans, as time passes, the
likelihood that borrowers who have continued to make payments
throughout the pandemic will now become non-cash flowing due to
COVID-19 continues to decline.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the third-party due diligence and the
R&W framework of the transaction.
Collateral description
Flagstar Mortgage Trust 2021-5INV (FSMT 2021-5INV) is the third
issue from Flagstar Mortgage Trust in 2021 and the first in 2021
with investor-property loans. Flagstar Bank, FSB (Flagstar) is the
sponsor of the transaction.
FSMT 2021-5INV is a securitization of GSE eligible first-lien
investment property mortgage loans. 100.0% of the pool by loan
balance were originated by Flagstar Bank, FSB. All the loans are
underwritten in accordance with Freddie Mac or Fannie Mae
guidelines, which take into consideration, among other factors, the
income, assets, employment and credit score of the borrower as well
as loan-to-value (LTV). As of the cut-off date of June 1, 2021, the
$603,860,512 pool consisted of 2,218 mortgage loans secured by
first liens on residential investment properties. The average
stated principal balance is $272,255 and the weighted average (WA)
current mortgage rate is 3.5%. The majority of the loans have a
30-year term, with 12 loans with terms ranging from 20 to 25 years.
All of the loans have a fixed rate. The WA original credit score is
768 for the primary borrower only and the WA combined original LTV
(CLTV) is 64.6%. The WA original debt-to-income (DTI) ratio is
37.4%. Approximately, 15.6% by loan balance of the borrowers have
more than one mortgage loan in the mortgage pool.
All of the mortgage loans originated by Flagstar were either
directly or indirectly originated through correspondents and
brokers.
Approximately half of the mortgage loans by loan balance (41.0%)
are backed by properties located in California. The second largest
geographic concentration of properties are Texas, which represents
6.9% by loan balance, the third largest is Arizona, which
represents 5.0% by loan balance. All other states each represent
less than 5% by loan balance. Approximately 21.5% (by loan balance)
of the pool is backed by properties that are 2-4 unit residential
properties whereas loans backed by single family residential
properties represent 48.1% (by loan balance) of the pool.
Origination Quality
Flagstar Bank, FSB (Flagstar) originated 100% of the loans in the
pool. The loans in the pool are underwritten in conformity with GSE
guidelines. Moody's consider Flagstar conforming and non-conforming
mortgage origination quality to be adequate. As a result, Moody's
did not make any adjustments to Moody's base case and Aaa stress
loss assumptions based on Moody's review of the underwriting, QC,
audit and loan performance.
Servicing arrangement
Moody's consider the overall servicing arrangement for this pool to
be adequate. Flagstar will service the mortgage loans. Servicing
compensation is subject to a step-up incentive fee structure. Wells
Fargo Bank, N.A. (Wells Fargo) will be the master servicer.
Flagstar will be responsible for principal and interest advances as
well as servicing advances. The master servicer will be required to
make principal and interest advances if Flagstar is unable to do
so.
Servicing compensation for loans in this transaction is based on a
fee-for-service incentive structure. The fee-for-service incentive
structure includes an initial monthly base fee of $20.50 for all
performing loans and increases according to certain delinquent and
incentive fee schedules. By establishing a base servicing fee for
performing loans that increases with the delinquency of loans, the
fee-for-service structure aligns monetary incentives to the
servicer with the costs of the servicer. The fee-for-service
compensation is reasonable and adequate for this transaction. It
also better aligns the servicer's costs with the deal's performance
and structure. The Class B-6-C (NR) is first in line to absorb any
increase in servicing costs above the base servicing costs.
Delinquency and incentive fees will be deducted from the Class
B-6-C interest payment amount first and could result in interest
shortfall to the certificates depending on the magnitude of the
delinquency and incentive fees.
Trustee and master servicer
The transaction trustee is Wilmington Savings Fund Society, FSB.
The custodian functions will be performed by Wells Fargo Bank, N.A.
The paying agent and cash management functions will be performed by
Wells Fargo Bank, N.A., rather than the trustee. In addition, Wells
Fargo, as master servicer, is responsible for servicer oversight,
and termination of servicers and for the appointment of successor
servicers. The master servicer will be required to make principal
and interest advances if Flagstar is unable to do so.
Third-party review
Moody's applied an adjustment to its Aaa and expected losses due to
the sample size. The credit, compliance, property valuation, and
data integrity portion of the third party review (TPR) was
conducted on a total of approximately 14.7% of the pool (by loan
count). Canopy Financial Technology Partners (Canopy) conducted due
diligence for a total random sample of 327 loans. The TPR results
indicated compliance with the originators' underwriting guidelines
for most of the loans without any material compliance issues or
appraisal defects. 100% of the loans reviewed received a grade B or
higher with 74.0% of loans receiving an A grade.
While the TPR results indicated compliance with the originators'
underwriting guidelines for most of the loans, no material
compliance issues and no material appraisal defects, the total
sample size of 327 loans reviewed did not meet Moody's credit
neutral criteria. Moody's therefore made an adjustment to loss
levels to account for this risk.
Representations and Warranties Framework
Flagstar Bank, FSB the originator as well as an investment-grade
rated entity, makes the loan-level representation and warranties
(R&Ws) for the mortgage loans. The loan-level R&Ws are strong and,
in general, either meet or exceed the baseline set of credit
neutral R&Ws Moody's have identified for US RMBS. Further, R&W
breaches are evaluated by an independent third party using a set of
objective criteria to determine whether any R&Ws were breached when
(1) the loan becomes 120 days delinquent, (2) the servicer stops
advancing, (3) the loan is liquidated at a loss or (4) the loan
becomes between 30 days and 119 days delinquent and is modified by
the servicer. Similar to other private-label transactions, the
transaction contains a "prescriptive" R&W framework. These reviews
are prescriptive in that the transaction documents set forth
detailed tests for each R&W that the independent reviewer will
perform.
Moody's assessed the R&W framework for this transaction as
adequate. Moody's analyzed the strength of the R&W provider, the
R&Ws themselves and the enforcement mechanisms. The R&W provider is
rated investment grade, the breach reviewer is independent, and the
breach review process is thorough, transparent and objective.
Moody's did not make any additional adjustment to Moody's base case
and Aaa loss expectations for R&Ws.
Transaction structure
The securitization has a shifting interest structure that benefits
from a senior subordination floor and a subordinate floor. Funds
collected, including principal, are first used to make interest
payments and then principal payments on pro rata basis up to the
senior bonds principal distribution amount, and then interest and
principal payments on sequential basis up to each subordinate bond
principal distribution amount. As in all transactions with shifting
interest structures, the senior bonds benefit from a cash flow
waterfall that allocates all prepayments to the senior bond for a
specified period of time, and increasing amounts of prepayments to
the subordinate bonds thereafter, but only if loan performance
satisfies delinquency and loss tests.
In this transaction, the Class A-11 notes' coupon is indexed to
SOFR. In addition, the coupon on Class A-11X is also impacted by
changes in SOFR. However, based on the transaction's structure, the
particular choice of benchmark has no credit impact. First,
interest payments to the notes, including the floating rate notes,
are subject to the net WAC cap, which prevents the floating rate
notes from incurring interest shortfalls as a result of increases
in the benchmark index above the fixed rates at which the assets
bear interest. Second, the shifting-interest structure pays all
interest generated on the assets to the bonds and does not provide
for any excess spread.
All certificates (except Class B-6-C) in this transaction are
subject to a net WAC cap. Class B-6-C will accrue interest at the
net WAC minus the aggregate delinquent servicing and aggregate
incentive servicing fee. For any distribution date, the net WAC
will be the greater of (1) zero and (2) the weighted average net
mortgage rates minus the capped trust expense rate.
Realized losses are allocated reverse sequentially among the
subordinate, starting with most junior, and senior support
certificates and on a pro-rata basis among the super senior
certificates.
Tail Risk and subordination floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 0.65% of the cut-off date pool
balance, and as subordination lock-out amount of 0.65% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
COVID-19 Impacted Borrowers
As of the cut-off date, no borrower in the pool has entered into a
COVID-19 related forbearance plan with the servicer. Also, if any
borrower enters or requests a COVID-19 related forbearance plan
from the cut-off date to the closing date, then the associated
mortgage loan will be removed from the pool. In the event a
borrower enters or requests a COVID-19 related forbearance plan
after the closing date, such mortgage loan (and the risks
associated with it) will remain in the mortgage pool. Any principal
forbearance amount created in connection with any modification
(whether as a result of a COVID-19 forbearance or otherwise) will
result in the allocation of a realized loss and to the extent any
such amount is later recovered, will result in the allocation of a
subsequent recovery.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
FREDDIE MAC 2020-HQA4: Moody's Hikes 10 Tranches From Ba2
---------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 22 classes of
credit risk transfer notes issued by Freddie Mac STACR REMIC Trust
2020-HQA4 (STACR 2020-HQA4).
STACR 2020-HQA4 is a high-LTV transaction that benefits from
mortgage insurance. In addition, the credit risk exposure of the
notes depends on the actual realized losses and modification losses
incurred by the reference pool.
The complete rating actions are as follows:
Issuer: FREDDIE MAC STACR REMIC TRUST 2020-HQA4
Cl. M-2, Upgraded to Baa1 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba1 (sf)
Cl. M-2I*, Upgraded to Baa1 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba1 (sf)
Cl. M-2R, Upgraded to Baa1 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba1 (sf)
Cl. M-2S, Upgraded to Baa1 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba1 (sf)
Cl. M-2T, Upgraded to Baa1 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba1 (sf)
Cl. M-2U, Upgraded to Baa1 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba1 (sf)
Cl. M-2A, Upgraded to A3 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Baa3 (sf)
Cl. M-2AI*, Upgraded to A3 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Baa3 (sf)
Cl. M-2AR, Upgraded to A3 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Baa3 (sf)
Cl. M-2AS, Upgraded to A3 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Baa3 (sf)
Cl. M-2AT, Upgraded to A3 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Baa3 (sf)
Cl. M-2AU, Upgraded to A3 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Baa3 (sf)
Cl. M-2B, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. M-2BI*, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. M-2BR, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. M-2BS, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. M-2BT, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. M-2BU, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. M-2RB, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. M-2SB, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. M-2TB, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
Cl. M-2UB, Upgraded to Baa2 (sf); previously on Sep 29, 2020
Definitive Rating Assigned Ba2 (sf)
*Reflects Interest-Only Classes
A List of Affected Credit Ratings is available at
https://bit.ly/2USURA1
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pool. In this
transaction, high prepayment rates averaging 35%-60% over the last
six months, driven by the low interest rate environment, have
benefited the bonds by increasing the paydown and building credit
enhancement. In addition, the transaction is structured with
sequential principal distributions amongst the subordinate bonds.
In Moody's analysis Moody's considered the additional risk posed by
borrowers enrolled in payment relief programs. Moody's increased
its MILAN model-derived median expected losses by 15% and Moody's
Aaa losses by 5% to reflect the performance deterioration resulting
from a slowdown in US economic activity due to the COVID-19
outbreak.
Moody's identified loans granted payment relief based on a review
of loan level cashflows over the last few months. In Moody's
analysis, Moody's considered loans that: (1) were not liquidated
but took a loss in the reporting period (to capture loans with
monthly deferrals that were reported as current) or (2) have actual
balances that increased or were unchanged in the reporting period,
excluding interest-only loans and pay-ahead loans, to be loans
under a payment relief program. Based on Moody's analysis, the
proportion of borrowers that are enrolled in payment relief plans
in the underlying pool ranged around 2.5%-5.5% over the last six
months.
In response to the COVID-19-spurred economic shock, the GSEs have
enacted temporary policies that allow servicers to offer payment
forbearance to borrowers impacted by COVID-19. The GSEs report
these loans that are granted forbearance as delinquent for purposes
of CRT transactions despite suspension of reporting borrowers to
the credit bureaus. Additionally, delinquencies caused by COVID-19
qualify for "natural disaster" treatment, and the transaction
provide a grace period for such loans before they are recognized as
a Credit Event Reference Obligation (when the loans become 180 day
or more delinquent). The losses are allocated based on actual
losses incurred upon liquidation of defaulted mortgage loans in the
reference pool (i.e., "actual loss" transaction) and these losses
are allocated to bondholders, reverse sequentially.
Moody's updated loss expectations on the pools incorporate, amongst
other factors, Moody's assessment of the representations and
warranties frameworks of the transactions, the due diligence
findings of the third-party reviews received at the time of
issuance, and the strength of the transaction's originators and
servicer.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US
economy continues on the path toward normalization. Economic
activity will continue to strengthen in 2021 because of several
factors, including the rollout of vaccines, growing household
consumption and an accommodative central bank policy. However,
specific sectors and individual businesses will remain weakened by
extended pandemic related restrictions.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
Please note that a Request for Comment was published in which
Moody's requested market feedback on potential revisions to one or
more of the methodologies used in determining these Credit Ratings.
If the revised methodologies are implemented as proposed, it is not
currently expected that the Credit Ratings referenced in this press
release will be affected.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds.
FREDDIE MAC 2021-HQA2: Moody's Assigns Ba2 Rating to 10 Tranches
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 28
classes of credit risk transfer notes issued by Freddie Mac STACR
REMIC TRUST 2021-HQA2. The ratings range from Baa1 (sf) to B3
(sf).
Freddie Mac STACR REMIC TRUST 2021-HQA2 (STACR 2021-HQA2) is the
second transaction of 2021 in the HQA series issued by the Federal
Home Loan Mortgage Corporation (Freddie Mac) to share the credit
risk on a reference pool of mortgages with the capital markets. The
transaction is structured as a real estate mortgage investment
conduit (REMIC). Class coupons of floating rate notes are based on
secured overnight financing rate (SOFR) and their respective fixed
margin.
The notes in STACR 2021-HQA2 receive principal payments as the
loans in the reference pool amortize or prepay. Principal payments
to the notes are paid from assets in the trust account established
from proceeds of the notes issuance. Interest payments to the notes
are paid from a combination of investment income from trust assets,
an asset of the trust known as the interest-only (IO) Q-REMIC
interest, and Freddie Mac. Freddie Mac is responsible to cover (1)
any interest owed on the notes not covered by the investment income
from the trust assets and the yield on the IO Q-REMIC interest and
(2) to reimburse the trust for any investment losses from sales of
the trust assets.
Investors have no recourse to the underlying reference pool. The
credit risk exposure of the notes depends on the actual realized
losses and modification losses incurred by the reference pool.
Freddie Mac is obligated to pay off the notes in December 2033 if
any balances remain outstanding. Of note, this is the second STACR
REMIC transaction in the HQA series with 12.5-year stated bullet
maturity on the offered notes, instead of 30-year maturity for
recent transactions.
In this transaction, the notes' coupon is indexed to SOFR. Based on
the transaction's synthetic structure, the particular choice of
benchmark has minimal credit impact. Interest payments to the notes
are backstopped by the sponsor, which prevents the notes from
incurring interest shortfalls as a result of increases in the
benchmark index. However, the coupon rate on the notes could impact
the amount of interest available to absorb modification losses, if
any, from the reference pool.
The complete rating actions are as follows:
Issuer: Freddie Mac STACR REMIC TRUST 2021-HQA2
Cl. M-1, Assigned Baa1 (sf)
Cl. M-2, Assigned Ba1 (sf)
Cl. M-2A, Assigned Baa3 (sf)
Cl. M-2B, Assigned Ba2 (sf)
Cl. M-2R, Assigned Ba1 (sf)
Cl. M-2S, Assigned Ba1 (sf)
Cl. M-2T, Assigned Ba1 (sf)
Cl. M-2U, Assigned Ba1 (sf)
Cl. M-2I*, Assigned Ba1 (sf)
Cl. M-2AR, Assigned Baa3 (sf)
Cl. M-2AS, Assigned Baa3 (sf)
Cl. M-2AT, Assigned Baa3 (sf)
Cl. M-2AU, Assigned Baa3 (sf)
Cl. M-2AI*, Assigned Baa3 (sf)
Cl. M-2BR, Assigned Ba2 (sf)
Cl. M-2BS, Assigned Ba2 (sf)
Cl. M-2BT, Assigned Ba2 (sf)
Cl. M-2BU, Assigned Ba2 (sf)
Cl. M-2BI*, Assigned Ba2 (sf)
Cl. M-2RB, Assigned Ba2 (sf)
Cl. M-2SB, Assigned Ba2 (sf)
Cl. M-2TB, Assigned Ba2 (sf)
Cl. M-2UB, Assigned Ba2 (sf)
Cl. B-1, Assigned B2 (sf)
Cl. B-1A, Assigned B1 (sf)
Cl. B-1AR, Assigned B1 (sf)
Cl. B-1AI*, Assigned B1 (sf)
Cl. B-1B, Assigned B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean is
0.72%, in a baseline scenario-median is 0.52%, and reaches 4.71% at
a stress level consistent with Moody's Aaa ratings.
Moody's calculated losses on the pool using US Moody's Individual
Loan Analysis (MILAN) GSE model based on the loan-level collateral
information as of the cut-off date. Loan-level adjustments to the
model results included, but were not limited to, qualitative
adjustments for origination quality and third-party review (TPR)
scope.
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of consumer assets from a gradual and unbalanced
recovery in US economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's increased its model-derived median expected losses by 10%
(7.7% for the mean) and Moody's Aaa loss by 2.5% to reflect the
likely performance deterioration resulting from the slowdown in US
economic activity due to the coronavirus outbreak. These
adjustments are lower than the 15% median expected loss and 5% Aaa
loss adjustments Moody's made on pools from deals issued after the
onset of the pandemic until February 2021. Moody's reduced
adjustments reflect the fact that the loan pool in this deal does
not contain any loans to borrowers who are not currently making
payments. For newly originated loans, post-COVID underwriting takes
into account the impact of the pandemic on a borrower's ability to
repay the mortgage. For seasoned loans, as time passes, the
likelihood that borrowers who have continued to make payments
throughout the pandemic will now become non-cash flowing due to
COVID-19 continues to decline.
Servicing practices, including tracking coronavirus related loss
mitigation activities, may vary among servicers in the transaction.
These inconsistencies could impact reported collateral performance
and affect the timing of any breach of performance triggers and the
amount of modification losses. Moody's may infer and extrapolate
from the information provided based on this or other transactions
or industry information, or make stressed assumptions.
Collateral Description
The reference pool consists of 188,304 prime, fixed-rate, one- to
four-unit, first-lien conforming mortgage loans acquired by Freddie
Mac. The loans were originated on or after October 1, 2019 with a
weighted average seasoning of eight months. Each of the loans in
the reference pool had a loan-to-value (LTV) ratio at origination
that was greater than 80% and less than or equal to 97%. 7.7% of
the pool are loans underwritten through Home Possible and 98.5% of
loans in the pool are covered by mortgage insurance as of the
cut-off date.
About 17.8% of loans in this transaction were underwritten through
Freddie Mac's Automated Collateral Evaluation (ACE) program. Under
ACE program, Freddie Mac assesses whether the estimate of value or
sales price of a mortgaged property, as submitted by the seller, is
acceptable as the basis for the underwriting of the mortgage loan.
If a loan is assessed as eligible for appraisal waiver, the seller
will not be required to obtain an appraisal and will be relieved
from R&Ws related to value, condition and marketability of the
property. A loan originated without a full appraisal will lack
details about the property's condition. Moody's consider ACE loans
weaker than loans with full appraisal. Specifically, for refinance
loans, seller estimated value, which is the basis for calculating
LTV, may be biased where there is no arms-length transaction
information. Although such value is validated against Freddie Mac's
in-house HVE model, there's still possibility for over valuations
subject to Freddie Mac's tolerance levels. All ACE loans in this
transaction are either rate or term refinance loans where Moody's
made haircuts to property values to account for overvaluation
risk.
Aggregation/Origination Quality
Moody's consider Freddie Mac's overall seller management and
aggregation practices to be adequate and Moody's did not apply a
separate loss-level adjustment for aggregation quality.
Underwriting
Freddie Mac uses a delegated underwriting process to purchase
loans. Sellers are required to represent and warrant that loans are
made in accordance with negotiated terms or Freddie Mac's guide.
Numerous checks in the selling system ensures that loans with the
correct characteristics are delivered to Freddie Mac. Sellers are
required to cure, make an indemnification payment or repurchase the
loans if a material underwriting defect is discovered subject to
certain limits. In certain cases, Freddie Mac may elect to waive
the enforcements of the repurchase if an alternative such as an
indemnification payment is provided.
Quality Control
Freddie Mac monitors each seller's risk exposure both on an
aggregated basis as well as by product lines. A surveillance team
reviews sellers' financials at least on an annual basis, monitors
exposure limits, risk ratings, lenders QC reports and internal
audit results and may adjust credit limits, require additional
loan/operational reviews or put the seller on a watch list, as
needed.
Home Possible Program
Approximately 7.7% of the loans by cut-off date balance were
originated under the Home Possible program. The program is designed
to make responsible homeownership accessible to low- to
moderate-income homebuyers, by requiring low down payments, lower
risk-adjusted pricing, flexibility in sources of income, and, in
certain circumstances, lower than standard mortgage insurance
coverage.
Home Possible loans in STACR 2021-HQA2's reference pool,
collectively, have a WA FICO of 748 and WA LTV of 93.6%, versus a
WA FICO of 757 and a WA LTV of 90.3% for the rest of the loans in
the pool. While Moody's MILAN model takes into account
characteristics listed on the loan tape, such as lower FICOs and
higher LTVs, there may be risks not captured by Moody's model due
to less stringent underwriting, including allowing more flexible
sources of funds for down payment and lower risk-adjusted pricing.
Moody's applied an adjustment to the loss levels to address the
additional risks that Home Possible loans may add to the reference
pool.
Enhanced Relief Refinance (ERR)
The ERR program is designed to provide refinance opportunities to
borrowers with existing Freddie Mac's mortgage loans who are
current on their mortgage payments but whose LTV ratios exceed the
maximum permitted for standard refinance products. The program is
intended to offer refinance opportunities to borrowers so they can
reduce their monthly payment. STACR 2021-HQA2's reference pool does
not include ERR loans at closing, however, transaction documents
allow for the replacement of loans in the reference pool with ERR
loans in the future. The replacement will not constitute a
prepayment on the replaced loan, credit event or a modification
event.
At closing, Moody's did not make any adjustment to Moody's
collateral losses due to the existence of the ERR program. Moody's
believe the programs are beneficial for loans in the pool,
especially during an economic downturn when limited refinancing
opportunities would be available to borrowers with low or negative
equity in their properties. However, since such refinanced loans
are likely to have later maturities and slower prepayment rates
than the rest of the loans, the reference pool is at risk of having
a high concentration of high LTV loans at the tail of the
transaction's life. Moody's will monitor ERR loans in the reference
pool and may make an adjustment in the future if the percentage of
them becomes significant after closing.
Mortgage insurance
98.5% of the loans in the pool were originated with mortgage
insurance. 97.0% of the loans benefit from BPMI which is usually
terminated when LTV falls below 78% under scheduled amortization,
and 3% of the loans benefit from LPMI or IPMI which lasts through
the life of the loan.
Freddie Mac will cover the amount that is reported as payable under
any effective mortgage insurance policy, but not received due to a
mortgage insurer insolvency or due to a settlement between the
mortgage insurer and Freddie Mac. The servicer is required to
reimburse Freddie Mac for claim curtailments rejections due to the
servicer's violation of the mortgage insurance policy.
The MILAN model output accounts for the presence of mortgage
insurance backed by Freddie Mac. Moody's rejection rate assumption
is 0% under base case and 1% under Aaa scenario.
Servicing arrangement
As master servicer, Freddie Mac has strong servicer oversight and
monitoring processes. Generally, Freddie Mac does not itself
conduct servicing activities. When a mortgage loan is sold to
Freddie Mac, the seller enters into an agreement to service the
mortgage loan for Freddie Mac in accordance with a comprehensive
servicing guide for servicers to follow. Freddie Mac monitors
primary servicer performance and compliance through its Servicer
Success Program, scorecard and servicing quality assurance group.
Freddie Mac also reviews individual loan files to identify
servicing performance gaps and trends.
Moody's consider the servicing arrangement to be adequate and
Moody's did not make any adjustments to Moody's loss levels based
on Freddie Mac's servicer management.
Third-party Review
Moody's consider the scope of the TPR based on Freddie Mac's
acquisition and QC framework to be adequate. Moody's assessed an
adjustment to loss at a Aaa stress level due to lack of compliance
review on TILA-RESPA Integrated Disclosure (TRID) violations.
The results and scope of the pre-securitization third-party,
loan-level review (due diligence) suggest a heavier reliance on
sellers' representations and warranties (R&Ws) compared with
private label securitizations. The scope of the TPR, for example,
is weaker because the sample size is small (only 0.23% of the loans
in reference pool are included in the sample). To the extent that
the TPR firm classifies certain credit or valuation discrepancies
as 'findings', Freddie Mac will review and may provide rebuttals to
those findings, which could result in the change of event grades by
the review firm.
The third-party due diligence scope focuses on the following:
Compliance: The diligence firm reviewed 404 loans for compliance
with federal, state and local high cost Home Ownership and Equity
Protection Act (HOEPA) regulations (374 loans were reviewed for
compliance plus 30 loans were reviewed for both credit/valuation
and compliance). None were determined to be noncompliant.
Appraisals: The third-party diligence provider also reviewed
property valuation on 1,535 loans in the sample pool (1,505 loans
were reviewed for credit/valuation plus 30 loans were reviewed for
both credit/valuation and compliance). 42 loans received final
valuation grades of "C". 37 of the 42 loans are ACE loans and had
Appraisal Desktop with Inspections (ADI) which did not support the
original appraised value within the 10% tolerance. The valuation
result is in line with the prior STACR transaction in terms of
percentage of TPR sample. Moody's didn't make additional adjustment
based on this result given Moody's have already made property value
haircuts to all ACE loans in the reference pool.
Credit: The third-party diligence provider reviewed credit on 1,535
loans in the sample pool. Within these 1,535 loans, the diligence
provider reviewed 1,505 loans for credit only, and 30 loans were
reviewed for both credit/valuation and compliance. Six loans had
final grades of "C" and 11 loans had final grades of "D" due to
underwriting defects. These loans were removed from the
transaction. The results were better than prior STACR transactions
Moody's rated.
Data integrity: The third-party review firm analyzed the sample
pool for data calculation and comparison to the imaged file
documents. The review revealed 102 data discrepancies on 94 loans.
Unlike private label RMBS transactions, a review of TRID violation
was not part of Freddie Mac's due diligence scope. A lack of
transparency regarding how many loans in the transaction contain
material violations of the TRID rule is a credit negative. However,
since Moody's expect overall losses on STACR transactions owing to
TRID violations to be fairly minimal, Moody's only made a slight
qualitative adjustment to losses under a Aaa scenario. Furthermore,
lender R&Ws and the GSEs' ability to remove defective loans from
the transactions will likely mitigate some of aforementioned
concerns.
Reps & Warranties Framework
Freddie Mac is not providing loan level R&Ws for this transaction
because the notes are a direct obligation of Freddie Mac. The
reference obligations are subject to R&Ws made by the sellers. As
such, Freddie Mac commands robust R&Ws from its seller/servicers
pertaining to all facets of the loan, including but not limited to
compliance with laws, compliance with all underwriting guidelines,
enforceability, good property condition and appraisal procedures.
Freddie Mac will be responsible for enforcing the R&Ws made by the
sellers/lenders in the reference pool. To the extent that Freddie
Mac discovers a confirmed underwriting defect or a major servicing
defect, the respective loan will be removed from the reference
pool. Since Freddie Mac retains a significant portion of the risk
in the transaction, it will likely take necessary steps to address
any breaches of R&Ws. For example, Freddie Mac undertakes quality
control reviews and servicing quality assurance reviews of small
samples of the mortgage loans that sellers deliver to Freddie Mac.
These processes are intended to determine, among other things, the
accuracy of the R&Ws made by the sellers in respect of the mortgage
loans that are sold to Freddie Mac. Moody's made no adjustments to
the transaction regarding the R&W framework.
The notes
Moody's refer to the M-1, M-2A, M-2B, B-1A, B-1B, B-2A and B-2B
notes as the original notes, and the M-2, M-2R, M-2S, M-2T, M-2U,
M-2I, M-2AR, M-2AS, M-2AT, M-2AU, M-2AI, M-2BR, M-2BS, M-2BT,
M-2BU, M-2BI, M-2RB, M-2SB, M-2TB, M-2UB, B-1, B-2, B-1AR, B-1AI,
B-2AR and B-2AI notes as the Modifiable and Combinable REMICs
(MACR) notes; together Moody's refer to them as the notes.
The M-2 notes can be exchanged for M-2A and M-2B notes, M-2R and
M-2I notes, M-2S and M-2I, M-2T and M-2I, and M-2U and M-2I notes.
The M-2A notes can be exchanged for M-2AR and M-2AI notes, M-2AS
and M-2AI notes, M-2AT and M-2AI, and M-2AU and M-2AI notes.
The M-2B notes can be exchanged for M-2BR and M-2BI notes, M-2BS
and M-2BI notes, M-2BT and M-2BI notes, and M-2BU and M-2BI notes.
Classes M-2I , M-2AI, M-2BI, B-1AI and B-2AI are interest only
notes referencing to the balances of Classes M-2, M-2A, M-2B, B-1A
and B-2A, respectively.
Classes M-2RB, M-2SB, M-2TB and M-2UB are each an exchangeable for
two classes that are initially offered at closing. Moody's ratings
of M-2RB, M-2SB, M-2TB and M-2UB reference the rating of Class M-2B
only, disregarding the rating of M-2AI. This is the case because
Class M-2AI's cash flow represents an insignificant portion of the
overall promise. In the event Class M-2B gets written down through
losses and Class M-2AI is still outstanding, Moody's would continue
to rate Classes M-2RB, M-2SB, M-2TB and M-2UB consistent with Class
M-2B's last outstanding rating so long as Classes M-2RB, M-2SB,
M-2TB and M-2UB are still outstanding.
Transaction Structure
Credit enhancement in this transaction is comprised of
subordination provided by mezzanine and junior tranches. Realized
losses are allocated in a reverse sequential order starting with
the Class B-3H reference tranche.
Interest due on the notes is determined by the outstanding
principal balance and the interest rate of the notes. The interest
payment amount is the interest accrual amount of a class of notes
minus any modification loss amount allocated to such class on each
payment date, or plus any modification gain amount. The
modification loss and gain amounts are calculated by taking the
respective positive and negative difference between the original
accrual rate of the loans, multiplied by the unpaid balance of the
loans, and the current accrual rate of the loans, multiplied by the
interest-bearing unpaid balance.
So long as the senior reference tranche is outstanding, and no
performance trigger event occurs, the transaction structure
allocates principal payments on a pro-rata basis between the senior
and non-senior reference tranches. Principal is then allocated
sequentially amongst the non-senior tranches.
The STACR 2021-HQA2 transaction allows for principal distribution
to subordinate notes by the supplemental subordinate reduction
amount even if performance triggers fail. The supplemental
subordinate reduction amount equals the excess of the offered
reference tranche percentage over 6.15%. The distribution of the
supplemental subordinated reduction amount would reduce principal
balances of the offered reference tranche and correspondingly limit
the credit enhancement of class A-H reference tranche to be always
below 6.15% plus the note balance of B-3H. This feature is
beneficial to the offered certificates.
Credit Events and Modification Events
Reference tranche write-downs occur as a result of loan level
credit events. A credit event with respect to any loan means any of
the following events: (i) a short sale with respect to the related
mortgaged property is settled, (ii) a related seriously delinquent
mortgage note is sold prior to foreclosure, (iii) the mortgaged
property that secured the related mortgage note is sold to a third
party at a foreclosure sale, (iv) an REO disposition occurs, or (v)
the related mortgage note is charged-off. As a result, the
frequency of credit events will be the same as actual loan default
frequency, and losses will impact the notes similar to that of a
typical RMBS deal.
Loans that experience credit events that are subsequently found to
have an underwriting defect, a major servicing defect or are deemed
ineligible will be subject to a reverse credit event. Reference
tranche balances will be written up for all reverse credit events
in sequential order, beginning with the most senior tranche that
has been subject to a previous write-down. In addition, the amount
of the tranche write-up will be treated as an additional principal
recovery, and will be paid to noteholders in accordance with the
cash flow waterfall.
If a loan experiences a forbearance or mortgage rate modification,
the difference between the original mortgage rate and the current
mortgage rate will be allocated to the reference tranches as a
modification loss. The Class B-3H reference tranche, which
represents 0.25% of the pool, will absorb modification losses
first. The final coupons on the notes will have an impact on the
amount of interest available to absorb modification losses from the
reference pool.
Tail Risk
Similar to prior STACR transactions, the initial subordination
level of 3.25% is lower than the deal's minimum credit enhancement
trigger level of 3.50%. The transaction begins by failing the
minimum credit enhancement test, leaving the subordinate tranches
locked out of unscheduled principal payments until the deal builds
an additional 0.25% subordination. STACR 2021-HQA2 does not have a
subordination floor. This is mitigated by the sequential principal
payment structure of the deal, which ensures that the credit
enhancement of the subordinate tranches is not eroded early in the
life of the transaction.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
GCAT 2021-NQM3: S&P Assigns B (sf) Rating on Class B-2 Certs
------------------------------------------------------------
S&P Global Ratings assigned its ratings to GCAT 2021-NQM3's
mortgage pass-through certificates.
The certificate issuance is an RMBS securitization backed by
first-lien, fixed- and adjustable-rate, fully amortizing, and
interest-only residential mortgage loans primarily secured by
single-family residential properties, planned-unit developments,
condominiums, condotels, cooperatives, two- to four-family
residential properties, and manufactured housing properties to both
prime and nonprime borrowers. The pool has 516 loans, which are
primarily nonqualified or ATR-exempt mortgage loans.
Since S&P assigned preliminary ratings and published its presale
report on June 16, 2021, it received final bond coupons and, as a
result, an updated structure on the pool. The sponsor (Blue River
Mortgage II LLC) decreased the size of class A-3 and increased the
sizes of classes M-1 and B-3 such that credit support remained
sufficient on all classes for the assignment of final ratings to be
unchanged from preliminary ratings.
The ratings reflect S&P's view of:
-- The asset pool's collateral composition;
-- The transaction's credit enhancement;
-- The transaction's associated structural mechanics;
-- The transaction's geographic concentration;
-- The transaction's representation and warranty framework;
-- The mortgage aggregator, Blue River Mortgage II LLC; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and the liquidity
available in the transaction.
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Ratings Assigned
GCAT 2021-NQM3(i)
Class A-1, $213,413,000: AAA (sf)
Class A-1X, $213,413,000: AAA (sf)(ii)
Class A-2, $21,356,000: AA (sf)
Class A-3, $19,031,000: A+ (sf)
Class M-1, $19,903,000: BBB (sf)
Class B-1, $7,409,000; BB (sf)
Class B-2, $5,230,000: B (sf)
Class B-3, $4,213,843: Not rated
Class A-IO-S, Notional(iii): Not rated
Class X, Notional(iii): Not rated
Class R, N/A: Not rated
(i)The ratings address the ultimate payment of interest and
principal.
(ii)Class A-1X will have a notional amount equal to the lesser of
(a) the balance of class A-1 immediately prior to such distribution
date and (b) the notional amount set forth on a schedule for the
related accrual period. After the 36th distribution date, the
notional amount of the A-1X certificates will be zero.
(iii)The notional amount will equal the aggregate principal balance
of the loans.
GS MORTGAGE 2019-GC40: DBRS Confirms B Rating on Class G-RR Certs
-----------------------------------------------------------------
DBRS, Inc. confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2019-GC40 issued by GS Mortgage
Securities Corporation Trust 2019-GC40 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (high) (sf)
-- Class F at BB (sf)
-- Class G-RR at B (sf)
Additionally, DBRS Morningstar confirmed its ratings to the
following rake bonds, which are secured by the beneficial interest
in the subordinate debt placed on the Diamondback Industrial
Portfolio 1 (Prospectus ID#14) and Diamondback Industrial Portfolio
2 (Prospectus ID#1) loans:
-- Class DB-A at AA (high) (sf)
-- Class DB-X at AA (low) (sf)
-- Class DB-B at A (high) (sf)
-- Class DB-C at BBB (high) (sf)
-- Class DB-D at BB (sf)
-- Class DB-E at B (high) (sf)
-- Class DB-F at B (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction. At issuance, the transaction consisted of 35
fixed-rate loans secured by 44 commercial and multifamily
properties with a trust balance of $1.03 billion. According to the
June 2021 remittance, all loans from issuance remain in the pool
with minimal amortization to date. The transaction is concentrated
by property type as 15 loans, representing 53.7% of the current
trust balance, are secured by office and industrial properties
while the third-largest concentration, representing 19.8% of the
current trust balance, are secured by mixed-use assets.
The Waterford Lakes Town Center loan (Prospectus ID#10; 3.29% of
pool) is the pool's only specially serviced loan. The loan is
secured by the fee simple interest in a 691,265-square-foot (sf)
regional retail shopping center in Orlando . The property is
shadowed-anchored by Target, Ashley Furniture, and LA Fitness,
while collateral anchor tenants include Regal Cinemas, Best Buy,
Jo-Ann Fabric, and Bed Bath & Beyond. The loan transferred to
special servicing in April 2021 for imminent nonmonetary default
after the borrower requested a temporary waiver of any and all
bankruptcy events of default and any penalties and costs as a
result of such action. The loan's sponsor, Washington Prime, filed
for bankruptcy protection in June 2021. The servicer agreed to
forbear all defaults triggered by any filing through July 1, 2021,
for a period of 270 days. Prior to its transfer to special
servicing, the property had maintained stable performance to date
as the property was 98% occupied as of September 2020 with a
trailing-12-months debt service coverage ratio of 1.34 times (x).
Washington Prime continues to categorize the property as one of its
Tier 1 properties.
The pool's largest loan, Diamondback Industrial Portfolio - 2
(Prospectus ID#1; 8.2% of pool), has a whole loan balance of $139
million, of which $78 million of senior debt is included in the
pooled classes while the subordinate $61 million component is tied
to the raked classes. The loan is secured by the fee-simple
interest in a portfolio of three single-tenant industrial
properties totaling more than 2.5 million sf located in
Pennsylvania, Tennessee, and Virginia. The portfolio is 100% leased
to investment-grade single tenants: Nestle S.A. (Nestle; rated AA
(low) with a Stable trend by DBRS Morningstar); The Home Depot,
Inc. (The Home Depot; rated "A" with a Stable trend by DBRS
Morningstar); and Amazon.com, Inc. (Amazon). All of the properties
were build-to-suit projects and have been the only occupants at
their respective buildings. Nestlé has occupied the property since
1994, while The Home Depot and Amazon have occupied their spaces
since 2008 and 2011, respectively. All three tenants have leases
extending beyond the loan term.
The second loan that is tied to the raked classes is associated
with the Diamondback Industrial Portfolio - 1 (Prospectus ID#14;
7.8% of pool). The loan has a whole loan balance of $130.3 million,
of which $20 million senior debt is included in the pool classes.
The subordinate $60.3 million note is tied to the raked classes.
The loan is secured by the fee-simple interest in a portfolio of
three single-tenant industrial properties totaling more than 2.2
million sf located in South Carolina, Pennsylvania, and Wisconsin.
The portfolio is 100% leased to investment-grade single tenants:
Amazon, T.J. Maxx, and FedEx. All three tenants are on leases that
extend beyond the loan term.
As of the June 2021 remittance, there are just seven loans,
representing 8.2% of the pool, on the servicer's watchlist.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2020-PJ4: Moody's Hikes Cl. B-5 Certs Rating to Ba3
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 11 classes of
notes issued by GS Mortgage-Backed Securities Trust 2020-PJ4 (GSMBS
2020-PJ4).
GSMBS 2020-PJ4 is a prime jumbo transaction issued by Goldman Sachs
Mortgage Company and serviced by NewRez LLC (formerly known as New
Penn Financial, LLC) d/b/a Shellpoint Mortgage Servicing. The
transaction has a shifting interest structure with subordination
floors that protect noteholders against tail risk.
The complete rating actions are as follows:
Issuer: GS MORTGAGE-BACKED SECURITIES TRUST 2020-PJ4
Cl. A-3, Upgraded to Aaa (sf); previously on Sep 30, 2020
Definitive Rating Assigned Aa1 (sf)
Cl. A-4, Upgraded to Aaa (sf); previously on Sep 30, 2020
Definitive Rating Assigned Aa1 (sf)
Cl. B, Upgraded to A2 (sf); previously on Sep 30, 2020 Definitive
Rating Assigned Baa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Sep 30, 2020
Definitive Rating Assigned Aa3 (sf)
Cl. B-1-A, Upgraded to Aa1 (sf); previously on Sep 30, 2020
Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Sep 30, 2020 Definitive
Rating Assigned A3 (sf)
Cl. B-2-A, Upgraded to A1 (sf); previously on Sep 30, 2020
Definitive Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Sep 30, 2020
Definitive Rating Assigned Baa3 (sf)
Cl. B-3-A, Upgraded to Baa1 (sf); previously on Sep 30, 2020
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Sep 30, 2020
Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Upgraded to Ba3 (sf); previously on Sep 30, 2020
Definitive Rating Assigned B2 (sf)
A List of Affected Credit Ratings is available
https://bit.ly/2U8LZG2
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pool. In this
transaction, high prepayment rates averaging 35%-55% over the last
six months, driven by the low interest rate environment, have
benefited the bonds by increasing the paydown and building credit
enhancement.
In Moody's analysis Moody's considered the additional risk posed by
borrowers enrolled in payment relief programs. Moody's increased
its MILAN model-derived median expected losses by 15% and Moody's
Aaa losses by 5% to reflect the performance deterioration resulting
from a slowdown in US economic activity due to the COVID-19
outbreak.
Moody's identified loans granted payment relief based on a review
of loan level cashflows over the last few months. In Moody's
analysis, Moody's considered loans that: (1) were not liquidated
but took a loss in the reporting period (to capture loans with
monthly deferrals that were reported as current) or (2) have actual
balances that increased or were unchanged in the reporting period,
excluding interest-only loans and pay-ahead loans, to be loans
under a payment relief program. Based on Moody's analysis, the
proportion of borrowers that are enrolled in payment relief plans
in the underlying pool ranged around 0.5%-2.5% over the last six
months.
Moody's updated loss expectations on the pools incorporate, amongst
other factors, Moody's assessment of the representations and
warranties frameworks of the transactions, the due diligence
findings of the third-party reviews received at the time of
issuance, and the strength of the transaction's originators and
servicer.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US
economy continues on the path toward normalization. Economic
activity will continue to strengthen in 2021 because of several
factors, including the rollout of vaccines, growing household
consumption and an accommodative central bank policy. However,
specific sectors and individual businesses will remain weakened by
extended pandemic related restrictions.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Principal Methodologies
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
April 2020.
Please note that a Request for Comment was published in which
Moody's requested market feedback on potential revisions to one or
more of the methodologies used in determining these Credit Ratings.
If the revised methodologies are implemented as proposed, it is not
currently expected that the Credit Ratings referenced in this press
release will be affected.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
GULF STREAM 5: S&P Assigns BB-(sf) Rating on $16.5MM Class D Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Gulf Stream Meridian 5
Ltd./Gulf Stream Meridian 5 LLC's floating-rate notes.
The note issuance is a CLO securitization backed primarily by
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans that are governed by collateral
quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Gulf Stream Meridian 5 Ltd./Gulf Stream Meridian 5 LLC
Class A-1, $276.75 million: AAA (sf)
Class A-2, $54.00 million: AA (sf)
Class B (deferrable), $38.25 million: A (sf)
Class C (deferrable), $27.00 million: BBB- (sf)
Class D (deferrable), $16.50 million: BB- (sf)
Subordinated notes, $38.50 million: Not rated
HALSEYPOINT CLO 4: S&P Assigns BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to HalseyPoint CLO 4
Ltd./HalseyPoint CLO 4 LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by HalseyPoint Asset Management LLC.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
HalseyPoint CLO 4 Ltd./HalseyPoint CLO 4 LLC
Class A, $238.00 million: AAA (sf)
Class B, $66.00 million: AA (sf)
Class C (deferrable), $23.00 million: A (sf)
Class D-1 (deferrable), $15.00 million: BBB+ (sf)
Class D-2 (deferrable), $8.00 million: BBB- (sf)
Class E (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $40.35 million: Not rated
HPS LOAN 10-2016: S&P Assigns B- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-RR, A-1-J,
A-2-RR, B-RR, CR and DR replacement notes and the new class X and E
notes from HPS Loan Management 10-2016 Ltd., a CLO originally
issued in December 2016 and previously refinanced in August 2019
that is managed by HPS Investment Partners LLC. At the same time,
we withdrew our ratings on the previously refinanced A-1-R notes
following payment in full on the June 21, 2021 refinancing date.
The previously refinanced A-2-R, B-R notes, and original class C,
and D notes were not rated by S&P Global Ratings.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement notes will be issued at a lower weighted
average cost of debt than the original notes; and
-- The stated maturity will be extended six years.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
HPS Loan Management 10-2016 Ltd. (Refinancing and Extension)
Class X, $4.50 million: AAA (sf)
Class A-1-RR, $244.00 million: AAA (sf)
Class A-1-J, $6.00 million: AAA (sf)
Class A-2-RR, $54.00 million: AA (sf)
Class B-RR, $24.00 million: A (sf)
Class CR, $24.00 million: BBB- (sf)
Class DR, $14.00 million: BB- (sf)
Class E, $5.90 million: B- (sf)
Subordinated notes, $42.15 million: NR
Additional subordinated notes, $5.20 million: NR
Ratings Withdrawn
HPS Loan Management 10-2016 Ltd.(i)
Class A-1-R: to NR from 'AAA (sf)'
(i)The class A-2-R, B-R, C, and D notes were not rated by S&P
Global Ratings.
NR--Not rated.
IVY HILL XII: S&P Assigns Prelim BB- (sf) Rating on Class D-R Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1R-R, A-1T-R, A-2A-R, A-2B-R, B-R, C-R, and D-R replacement notes
from Ivy Hill Middle Market Credit Fund XII Ltd./Ivy Hill Middle
Market Credit Fund XII LLC, a CLO originally issued in April 2017
that is managed by Ivy Hill Asset Management L.P.
The preliminary ratings are based on information as of June 24,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the June 28, 2021, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class A-1R-R, A-1T-R, A-2A-R, B-R, and C-R
notes are expected to be issued at a lower spread over three-month
LIBOR than the original notes, while the replacement class D-R
notes are expected to be issued at a higher spread over three-month
LIBOR than the original notes.
-- The replacement class A-2B-R notes are expected to be issued at
a fixed coupon and pro rata with the replacement class A-2A-R
notes.
-- The reinvestment period will be extended by 4.25 years; and the
stated maturity, non-call period, and weighted average life test
date will each be extended four years.
-- Of the identified underlying collateral obligations, 97.03%
have credit ratings assigned by S&P Global Ratings.
-- Of the identified underlying collateral obligations, 56.34%
have recovery ratings assigned by S&P Global Ratings.
-- The S&P Global Ratings' 'A-1' rating is required for the
variable funding notes holder and the replacement mechanism or
funding requirement is in place if the rating falls below 'A-1'.
Replacement And Original Note Issuances
Replacement notes
Class A-1R-R, $25.00 million: CP rate + 1.60%
Class A-1T-R, $347.90 million: Three-month LIBOR + 1.60%
Class A-2A-R, 475.80 million: Three-month LIBOR + 1.90%
Class A-2B-R, $10.00 million: 3.03%
Class B-R (deferrable), 449.50 million: Three-month LIBOR +
2.90%
Class C-R (deferrable), $29.70 million: Three-month LIBOR +
4.00%
Class D-R (deferrable), $42.90 million: Three-month LIBOR +
8.17%
Subordinated notes, $81.65 million: Residual
Original notes
Class A-1a, $159.80 million: Three-month LIBOR + 1.70%
Class A-1b, $53.00 million: Three-month LIBOR + 1.70%
Class A-2, $49.30 million: Three-month LIBOR + 2.25%
Class B (deferrable), $30.40 million: Three-month LIBOR + 3.00%
Class C (deferrable), $22.80 million: Three-month LIBOR + 4.10%
Class D (deferrable), $29.70 million: Three-month LIBOR + 7.56%
Subordinated notes, $36.30 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Ivy Hill Middle Market Credit Fund XII Ltd./Ivy Hill Middle
Market Credit Fund XII LLC
Class A-1R-R(i), $25.00 million: AAA (sf)
Class A-1T-R, $347.90 million: AAA (sf)
Class A-2A-R, $75.80 million: AA (sf)
Class A-2B-R, $10.00 million: AA (sf)
Class B-R (deferrable), $49.50 million: A- (sf)
Class C-R (deferrable), 429.70 million: BBB- (sf)
Class D-R (deferrable), $42.90 million: BB- (sf)
Subordinated notes, $81.65 million: Not rated
(i)The class A-1R-R variable funding notes can be drawn during the
reinvestment period to fund underlying delayed-draw or revolving
loans.
JP MORGAN 2005-CIBC11: Moody's Lowers Cl. X-1 Certs Rating to C
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on one class and
downgraded the ratings on two classes in J.P. Morgan Chase
Commercial Mortgage Securities Corp. Series 2005-CIBC11:
Cl. H, Downgraded to Caa3 (sf); previously on Nov 20, 2018 Affirmed
Caa2 (sf)
Cl. J, Affirmed C (sf); previously on Nov 20, 2018 Affirmed C (sf)
Cl. X-1*, Downgraded to C (sf); previously on Feb 13, 2019 Upgraded
to Caa2 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The rating on Cl. H was downgraded due to Moody's expected loss as
well as the significant exposure to one remaining loan,
constituting 74% of the deal, that is already Real Estate Owned
(REO).
The rating on Cl. J was affirmed because the rating is consistent
with Moody's expected loss plus realized losses. Class J has
already experienced a 9% loss as a result of previously liquidated
loans.
The rating on the IO Class, Cl. X-1, was downgraded due to the
decline in the credit quality of its reference classes resulting
from principal paydowns of higher quality reference classes.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of commercial real estate as the US economy
continues on the path toward normalization. Economic activity will
continue to strengthen in 2021 because of several factors,
including the rollout of vaccines, growing household consumption
and an accommodative central bank policy. However, specific sectors
and individual businesses will remain weakened by extended pandemic
related restrictions. Stress on commercial real estate properties
will be most directly stemming from declines in hotel occupancies
(particularly related to conference or other group attendance) and
declines in foot traffic and sales for non-essential items at
retail properties.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's rating action reflects a base expected loss of 36.3% of the
current pooled balance, compared to 2.8% at Moody's last review.
Moody's base expected loss plus realized losses is now 3.5% of the
original pooled balance, compared to 3.4% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
https://bit.ly/3qDz9Mk.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating Large Loan
and Single Asset/Single Borrower CMBS" published in September
2020.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 74% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced loans to the most junior class and the
recovery as a pay down of principal to the most senior class.
DEAL PERFORMANCE
As of the June 14, 2021 distribution date, the transaction's
aggregate certificate balance has decreased by 99% to $18.4 million
from $1.8 billion at securitization. The certificates are
collateralized by five mortgage loans.
Thirty-one loans have been liquidated from the pool, resulting in
an aggregate realized loss of $56.9 million (for an average loss
severity of 18%).
One loan, the Shoppes at IV Loan ($13.5 million -- 73.6% of the
pool), is currently in special servicing. The specially serviced
loan is secured by the leasehold interest in a 134,000 square foot
(SF) retail center in Paramus, New Jersey. The property was 100%
leased as of March 2021, compared to 80% as of December 2017 and
96% at securitization. The property underwent a material increase
in ground rent payments and as a result, the borrower was not able
to refinance at loan maturity in February 2015. The loan
transferred to special servicing in February 2015 for maturity
default and became REO in April 2018.
As of the June 2021 remittance statement cumulative interest
shortfalls were $7.5 million. Moody's anticipates interest
shortfalls will continue because of the exposure to specially
serviced loans and/or modified loans. Interest shortfalls are
caused by special servicing fees, including workout and liquidation
fees, appraisal entitlement reductions (ASERs), loan modifications
and extraordinary trust expenses.
The top three non-specially serviced loans represent 25% of the
pool balance. The largest loan is the Arlington Plaza Loan ($1.9
million -- 10.2% of the pool), which is secured by a 91,000 SF
retail center located in Greenville, North Carolina. The property
is reported to be 100% leased and the loan is fully amortizing. The
loan has amortized nearly 70% since securitization and Moody's LTV
and stressed DSCR are 38% and 3.03X, respectively, compared to 57%
and 1.99X at the last review.
The second largest loan is the Braid Office Building Loan ($1.9
million -- 10.1% of the pool), which is secured by a 62,997 SF
office complex located in CBD Nashville, Tennessee. As of March
2020, the property was 100% occupied and the loan is fully
amortizing. The loan has amortized 69% since securitization and
Moody's LTV and stressed DSCR are 20% and 5.39X, respectively,
compared to 24% and 4.41X at the last review.
The third largest loan is the Walgreens Shiloh Loan ($828,039 --
4.5% of the pool), which is secured by a single tenant retail
property leased to Walgreens with a lease expiring in 2029. The
loan is fully amortizing. The loan has amortized 70% since
securitization and Moody's LTV and stressed DSCR are 30% and 3.23X,
respectively, compared to 46% and 2.11X at the last review.
JP MORGAN 2012-C6: Fitch Lowers Class H Certs Rating to 'CC'
------------------------------------------------------------
Fitch Ratings has downgraded four and affirmed seven classes of
J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-C6
(JPMCC 2012-C6) commercial mortgage pass-through certificates.
DEBT RATING PRIOR
---- ------ -----
J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-C6
A-3 46634SAC9 LT AAAsf Affirmed AAAsf
A-S 46634SAF2 LT AAAsf Affirmed AAAsf
A-SB 46634SAD7 LT AAAsf Affirmed AAAsf
B 46634SAG0 LT AAsf Affirmed AAsf
C 46634SAH8 LT A+sf Affirmed A+sf
D 46634SAJ4 LT A-sf Affirmed A-sf
E 46634SAM7 LT BBsf Downgrade BBB-sf
F 46634SAP0 LT BBsf Downgrade BBB-sf
G 46634SAR6 LT CCCsf Downgrade BBsf
H 46634SAT2 LT CCsf Downgrade CCCsf
X-A 46634SAE5 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades and Negative Rating
Outlooks reflect higher loss expectations on the two specially
serviced regional mall loans, Arbor Place Mall and Northwoods Mall
(combined 23.6% of pool), driven by continued performance
deterioration and increased refinance risk. Both malls are
sponsored by CBL & Associates Properties, Inc. (CBL), which has
filed bankruptcy.
There are 11 Fitch Loans of Concern (FLOCs; 51.2% of pool),
including the two specially serviced regional mall loans (23.6%).
Since Fitch's last rating action, the Northwoods Mall loan
transferred to special servicing in February 2021.
Fitch's current ratings incorporate a base case loss of 9.60%. The
Negative Outlooks reflect losses that could reach 14% when
factoring additional pandemic-related stresses and potential
outsized losses on the Arbor Place Mall and Northwoods Mall loans.
Regional Malls: Fitch's base loss expectation on the Arbor Place
Mall loan (14.8%), which is secured by a regional mall in
Douglasville, GA, increased to 39% from 25% at the last rating
action, and reflects a 15% cap rate and 10% haircut to the YE 2020
NOI. Fitch also performed an additional sensitivity that applied a
potential outsized loss of 50% to the loan's maturity balance,
which implies a cap rate of approximately 20% on the YE 2020 NOI.
The loan, which transferred to special servicing in April 2020 for
imminent monetary default, matures in May 2022.
The mall's non-collateral Sears closed in February 2020. The
collateral JCPenney (14.7% of collateral NRA) had previously
announced in June 2020 it would be permanently closing; however,
the company changed its plans to close this location in July 2020
and the store remains open as of June 2021. Non-collateral anchors
include Dillard's, Belk, and Macy's and the larger collateral
tenants include Regal Cinemas (13.4% of collateral NRA, leased
through October 2024), Bed Bath & Beyond (6.9%; January 2023) and
Forever 21 (4.7%; May 2022).
Collateral occupancy was 93.2% as of March 2021, compared with 97%
in March 2020. Current mall occupancy is estimated to be 85.4%
given the Sears closure, which is not reflected on the rent roll.
Upcoming lease rollover includes 11% of the collateral NRA in 2021,
14.8% in 2022, and 23.3% in 2023. In-line tenant sales were $372
psf in 2019, compared with $359 psf in 2018 and $358 psf in 2017.
Fitch's base loss expectation on the Northwoods Mall loan (8.8%),
which is secured by a regional mall in North Charleston, SC,
increased to 22% from 15% at the last rating action, and reflects a
15% cap rate and 25% haircut to YE 2019 NOI. Fitch also performed
an additional sensitivity that applied a potential outsized loss of
50% to the loan's maturity balance, which implies a cap rate of
approximately 31% on the YE 2019 NOI. The loan, which transferred
to special servicing in February 2021 due to the sponsor and
guarantor, CBL, filing for bankruptcy, matures in April 2022.
Non-collateral anchors include Dillard's and Belk, as well as a
former Sears box that has been partially backfilled by Burlington
Stores. The only collateral anchor is JCPenney (28.3% of collateral
NRA; February 2024). Other larger collateral tenants include
Books-A-Million (5.1%; January 2026), Planet Fitness (5%; December
2025), and H&M (4.9%; January 2029); Books-A-Million and Planet
Fitness each recently executed five-year lease renewals.
Collateral occupancy was 90.7% in March 2021, down from 95.8% in
March 2020 due to nine tenants (6.6%) vacating at or prior to lease
expiration. Total mall occupancy was 90.8% as of March 2021,
compared to 92.9% in March 2020. Upcoming lease rollover includes
4.4% of the collateral NRA in 2021, 11.5% in 2022 and 9.8% in 2023.
Inline tenant sales were $394 psf in 2019, compared with $402 psf
in 2018 and $381 psf in 2017.
For both mall loans, the borrower has kept the loan payments
current. The special servicer is monitoring the bankruptcy and
currently reviewing a waiver agreement that would allow the sponsor
to work through the bankruptcy. Per the servicer, the borrower
anticipates emerging from bankruptcy by November 2021.
Increased Credit Enhancement: As of the June 2021 distribution
date, the pool's aggregate principal balance has been reduced by
38.6% to $696.4 million from $1.1 billion at issuance. Four loans
(20%) have been defeased, including the largest loan, 200 Public
Square (16%). Since the last rating action, one loan (Berry
Plastics Expansion; $13.6 million) was repaid prior to its March
2022 anticipated repayment date. The majority of the pool (26
loans; 88.5 of pool) is currently amortizing. Six loans (11.5%) are
full-term interest-only.
The pool has experienced $2.9 million (0.3% of original pool) in
realized losses since issuance from the disposition of the 317 6th
Avenue loan by discounted payoff in February 2017. Two loans (5.7%
of pool) mature between July and December of 2021 and the remaining
30 loans (94.3%) mature between February and May of 2022.
Alternative Loss Considerations: In addition to factoring potential
outsized losses on both of the regional mall loans given continued
performance declines, prolonged workout timelines, weak sponsorship
and lack of market liquidity for regional malls, Fitch also
considered a scenario where only the two regional mall loans remain
in the pool. Classes C through H are reliant on proceeds from
regional mall loans for repayment. This scenario contributed to the
Negative Outlooks.
RATING SENSITIVITIES
The Negative Outlooks reflect potential downgrade based on the
additional sensitivity analyses performed on the Arbor Place Mall
and Northwoods Mall loans, as well as concerns surrounding
performance and the ultimate impact of the coronavirus pandemic.
The Stable Outlooks reflect the increasing credit enhancement (CE)
from paydowns and defeasance and expected continued amortization.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, particularly on the
regional mall FLOCs, coupled with additional paydown and/or
defeasance.
-- An upgrade to class B may occur with significant improvement
in CE and/or defeasance, and with the stabilization of
performance on the FLOCs and/or the properties affected by the
coronavirus pandemic; however, adverse selection and increased
concentrations, or the underperformance of the FLOCs could
cause this trend to reverse.
-- Upgrades to classes C, D, E, F, G and H are not currently
expected given continued performance and refinance concerns
with the Arbor Place Mall and Northwoods Mall loans, but could
occur if the performance stabilizes for the regional malls
and/or these assets are resolved with better recoveries than
expected. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool-level losses from underperforming or
specially serviced loans/assets. Downgrades to classes A-3, A
SB, and A-S are not likely due to the position in the capital
structure, but may occur should interest shortfalls affect
these classes.
-- A downgrade to class B is possible should expected losses for
the pool increase significantly and the non-mall loans
susceptible to the coronavirus pandemic suffer losses.
-- Downgrades to classes C and D are possible should expected
losses for the pool increase significantly and both the Arbor
Place Mall and Northwoods Mall loans experience outsized
losses.
-- Downgrades to classes E and F would occur should loss
expectations increase from continued performance decline of
the FLOCs, loans susceptible to the pandemic not stabilize,
additional loans default or transfer to special servicing
and/or higher losses incurred on the Arbor Place Mall and
Northwoods Mall loans than expected.
-- Further downgrades to classes G and H would occur as losses
are realized and/or become more certain.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-C6 has
an ESG Relevance Score of '4' for Exposure to Social Impacts due to
two regional mall loans that are underperforming as a result of
changing consumer preferences in shopping, which has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JP MORGAN 2019-ICON: DBRS Confirms B(low) Rating on Class G Certs
-----------------------------------------------------------------
DBRS, Inc. confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2019-ICON issued by J.P. Morgan
Chase Commercial Mortgage Securities Trust 2019-ICON as follows:
-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class X-B at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the trust, which is secured by 18 separate nonrecourse, first-lien
mortgage loans totaling $174.7 million. The transaction is backed
by 10 multifamily properties and eight mixed-use properties with
352 residential and 17 commercial units in Manhattan and Brooklyn,
New York. The collateral's performance was greatly affected by the
Coronavirus Disease (COVID-19) pandemic as all properties are
concentrated in New York, which experienced multiple coronavirus
outbreaks since March 2020 that resulted in rigorous lockdowns. The
numbers of coronavirus cases in New York has significantly declined
since January 2021, so various pandemic-related restrictions have
been lifted. As of June 15, 2021, Governor Andrew Cuomo removed
most restrictions with the exception of large-scale indoor events.
Various reports indicate a recent migration back to the city as
social events return. While the pandemic stressed the collateral's
performance in 2020, DBRS Morningstar believes demand will return
in the medium term and the portfolio will return to near-issuance
performance levels by loan maturity in 2024. The sponsor appears to
be committed to the collateral, as 17 of the 18 loans have remained
current throughout the pandemic despite low occupancy rates and
debt service coverage ratios (DSCR).
The 18 loans have five-year interest-only (IO) loan terms and are
not cross-collateralized or cross-defaulted. Each borrower is a
special-purpose entity sponsored by Icon Realty Management, LLC, a
real estate investment and management firm headquartered in New
York. Per the sponsor's website, the firm owns and manages more
than 1,800 apartment units across the city's more desirable
neighborhoods. The trust consists of $60.7 million of Trust A
Notes, which are pari passu with companion notes, and $83.9 million
of Trust B Notes. Additionally, $30.0 million of companion notes
were securitized in the JPMCC 2019-COR5 transaction (not rated by
DBRS Morningstar). The properties are in desirable areas in
Manhattan and Brooklyn, including East Village, Greenwich Village,
the Upper East Side, Brooklyn Heights, and Williamsburg. Beginning
in 2007, the sponsor gradually acquired the 18-property portfolio
at a total cost of $160.5 million and invested an additional $55.6
million in capital improvements for a total cost basis of $216.0
million. The properties have potential for additional revenue bumps
if rent-restricted units are legally vacated and converted into
market-rate units.
Given the desirable locations, the properties exhibited high
occupancy rates prior to the pandemic. A total of 109 units (31% of
total units) are subject to New York's apartment rent restrictions,
which limits the amount of rent that landlords can charge as long
as the current tenants remain in residence. Leverage for the trust
debt is relatively high at a 101.1% loan-to-value ratio based on
the DBRS Morningstar value of $172.8 million derived in July 2020.
A positive qualitative adjustment was made to cash flow volatility
because the 99 rent-stabilized units and 10 rent-controlled units
provide sticky tenancy.
Per the June 2021 remittance report, one of the loans, 808
Lexington Avenue (5.3% of the whole loan balance), transferred to
the special servicer in April 2021 because of payment default when
the loan was 60 days delinquent. In addition, 14 of the 18 loans
are on the servicer's watchlist primarily because of declining
occupancy rates and low DSCRs. The 14 loans were added to the
servicer's watchlist in Q4 2020 or Q1 2021, and all payments for
watchlist loans have remained current through June 2021. Servicer
commentary notes cash traps had been triggered for a majority of
these loans after failing to meet their respective required DSCR
thresholds as of September 2020.
Property financials reported in the June 2021 Investor Reporting
Package showed the portfolio's performance was severely affected by
the coronavirus pandemic. Revenue and net cash flow for YE2020
declined 28.7% and 39.6%, respectively, relative to YE2019 figures.
The February 2021 rent roll hinted at a possible recovery as the
annual in-place pro forma rental income totaled $12.1 million,
which was a 1.5% improvement over YE2020 revenue. The portfolio
performance appears to be improving while New York's coronavirus
situation has also drastically improved in Q1 and Q2 2021.
February 2021 rent rolls reported that the 352 multifamily units
were 78.1% occupied, compared with the 99.3% occupancy rate at
issuance. At that time, occupancy rates for market units,
rent-stabilized units, and rent-controlled units were 70.0%, 96.9%,
and 90.9%, respectively. DBRS Morningstar believes the portfolio's
occupancy rate and in-place rents are likely greater than the
February 2021 rent rolls indicated, as demand has quickly regained
its footing in recent months. Reis data for the New York Metro in
Q1 2021 showed that the average asking rent and average vacancy
rate totaled $3,120 per unit and 4.3%, respectively. As a
comparison, the Q4 2019 average asking rent and average vacancy
rate were $3,555 per unit and 3.5%, respectively. The average
asking rent decreased 12.1% since Q4 2019 as a result of the
pandemic. Reis projects the average asking rent and average vacancy
rate to return to Q4 2018 (issuance) figures by 2024.
At issuance, approximately 15% of the gross potential income was
derived from the 16,700 square feet (sf) of retail space across
eight properties. The February 2021 rent roll reported the retail
space was 89.4% occupied with an average rent of $129 per sf (psf),
compared with the 100% occupancy rate and average rent of $155 psf
at issuance. Two tenants, Fig & Olive and Sunshine Body Works,
vacated from their respective units at 808 Lexington Avenue and
1384 First Avenue during the pandemic.
The 808 Lexington Avenue loan (5.3% of the trust balance) is
secured by a mixed-use property in the Upper East Side near the
southeast corner of Central Park. The property consists of two
retail units totaling 2,245 sf and two market-rate apartments. The
loan transferred to the special servicer in April 2021 because of
monetary default after the February 2021 loan payment was over 60
days delinquent. The property's anchor tenant, Fig & Olive
restaurant, filed Chapter 11 bankruptcy in July 2020 and vacated
the property. Fig & Olive's bankruptcy plan resulted in a
settlement that netted the borrower more than $325,000, which was
remitted to the servicer. Fig & Olive historically generated more
than 50% of the monthly gross rent collected at the subject
property. Prior to vacating, the special servicer noted the tenant
paid $401 psf of annual modified gross rents. CBRE provided four
lease comparables for the subject, which ranged from $106 psf to
$200 psf in annual rent. The special servicer believes it is
unlikely for the property to backfill the space at a rent that will
generate a minimum 1.00 times DSCR. The special servicer provided a
business plan report dated June 2021 that included a settlement
agreement that will bring the loan current through the May 2021
payment immediately. Other terms include the waiving of default
interest and late fees and the establishment of a cash lockbox.
DBRS Morningstar will continue to monitor the loan for leasing
updates, which will ultimately drive the outcome of the loan
workout.
Notes: All figures are in U.S. dollars unless otherwise noted.
KKR CLO 34: Moody's Assigns Ba3 Rating to $22.5MM Class E Notes
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes issued by KKR CLO 34 Ltd. (the "Issuer" or "KKR 34").
Moody's rating action is as follows:
US$320,000,000 Class A Senior Secured Floating Rate Notes due 2034,
Assigned Aaa (sf)
US$57,500,000 Class B Senior Secured Floating Rate Notes due 2034,
Assigned Aa2 (sf)
US$25,000,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2034, Assigned A2 (sf)
US$33,750,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2034, Assigned Baa3 (sf)
US$22,500,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
KKR 34 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 95% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 5% of the portfolio may consist of second lien loans,
unsecured loans and permitted non-loan assets (consisting of senior
secured bonds, senior secured notes and high-yield bonds). The
portfolio is 100% ramped as of the closing date.
KKR Financial Advisors II, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2923
Weighted Average Spread (WAS): 3.30%
Weighted Average Recovery Rate (WARR): 47.75%
Weighted Average Life (WAL): 9.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
MADISON PARK LI: Moody's Assigns Ba3 Rating to $20MM Class E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by Madison Park Funding LI, Ltd. (the "Issuer" or
"Madison Park Funding LI").
Moody's rating action is as follows:
US$300,000,000 Class A-1 Floating Rate Senior Notes due 2034,
Definitive Rating Assigned Aaa (sf)
US$20,000,000 Class E Deferrable Floating Rate Mezzanine Notes due
2034, Definitive Rating Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Madison Park Funding LI is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans and eligible investments, and up to
10.0% of the portfolio may consist of non-senior secured loans. The
portfolio is approximately 100% ramped as of the closing date.
Credit Suisse Asset Management, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued four other
classes of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 3220
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 4.00%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 9.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
MADISON PARK LI: Moody's Gives (P)Ba3 Rating to Class E Notes
-------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to two
classes of notes to be issued by Madison Park Funding LI, Ltd. (the
"Issuer" or "Madison Park Funding LI").
Moody's rating action is as follows:
US$300,000,000 Class A-1 Floating Rate Senior Notes due 2034,
Assigned (P)Aaa (sf)
US$20,000,000 Class E Deferrable Floating Rate Mezzanine Notes due
2034, Assigned (P)Ba3 (sf)
The notes listed are referred to, collectively, as the "Rated
Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Madison Park Funding LI is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans and eligible investments, and up to
10.0% of the portfolio may consist of non-senior secured loans.
Moody's expect the portfolio to be approximately 100% ramped as of
the closing date.
Credit Suisse Asset Management, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer will issue four other
classes of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 3220
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 4.0%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 9.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
MCF CLO VII: S&P Assigns BB- (sf) Rating on Class E-R Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement notes from MCF CLO VII LLC, a CLO
originally issued in September 2017 that is managed by Madison
Capital Funding LLC.
On the June 24, 2021, refinancing date, the proceeds from the
replacement notes were used to redeem the original notes.
Correspondingly, S&P withdrew its ratings on the original notes and
assign ratings to the replacement notes.
The replacement notes were issued via a supplemental indenture,
which outlined the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class B-R notes were issued at a lower spread
over three-month LIBOR than the original notes.
-- The replacement class A-R, C-R, and E-R notes were issued at a
higher spread over three-month LIBOR than the original notes.
-- The replacement class D-R notes were issued at the same spread
over three-month LIBOR than the original notes.
-- The replacement class A-R, B-R, C-R, D-R, and E-R notes were
issued at a floating spread, replacing the current floating
spread.
-- The stated maturity and reinvestment period were extended by
approximately 3.75 years.
-- A number of new features were added, including but not limited
to LIBOR replacement language, amendments to the definitions of
collateral obligation and concentration limitations, the ability to
invest additional monies in workout related assets, the ability to
participate in distressed exchanges, the ability to receive
contributions and allocate any such monies to a number of permitted
uses (as defined in the document), and the ability for the issuer
to purchase notes (sequentially).
-- Of the identified underlying collateral obligations, 95.62%
have credit ratings assigned by S&P Global Ratings.
-- Of the identified underlying collateral obligations, 5.60% have
recovery ratings assigned by S&P Global Ratings.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches."
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
S&P will continue to review whether, in its view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as it deems
necessary.
Ratings Assigned
MCF CLO VII LLC
Class A-R, $172.50 million: AAA (sf)
Class B-R, $31.50 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-R (deferrable), $16.00 million: BBB- (sf)
Class E-R (deferrable), $20.00 million: BB- (sf)
Subordinated notes, $44.78 million: Not rated
Ratings Withdrawn
MCF CLO VII LLC
Class A to not rated from 'AAA (sf)'
Class B to not rated from 'AA (sf)'
Class C (deferrable) to not rated from 'A (sf)'
Class D (deferrable) to not rated from 'BBB- (sf)'
Class E (deferrable) to not rated from 'BB- (sf)'
MELLO MORTGAGE 2021-INV1: DBRS Finalizes B Rating on Class B5 Certs
-------------------------------------------------------------------
DBRS, Inc. finalized the following provisional ratings on the
Mortgage Pass-Through Certificates, Series 2021-INV1 (the
Certificates) issued by Mello Mortgage Capital Acceptance 2021-INV1
(MELLO 2021-INV1):
-- $299.8 million Class A-1 at AAA (sf)
-- $275.5 million Class A-2 at AAA (sf)
-- $236.9 million Class A-3 at AAA (sf)
-- $236.9 million Class A-3-A at AAA (sf)
-- $236.9 million Class A-3-X at AAA (sf)
-- $177.7 million Class A-4 at AAA (sf)
-- $177.7 million Class A-4-A at AAA (sf)
-- $177.7 million Class A-4-X at AAA (sf)
-- $59.2 million Class A-5 at AAA (sf)
-- $59.2 million Class A-5-A at AAA (sf)
-- $59.2 million Class A-5-X at AAA (sf)
-- $142.6 million Class A-6 at AAA (sf)
-- $142.6 million Class A-6-A at AAA (sf)
-- $142.6 million Class A-6-X at AAA (sf)
-- $94.3 million Class A-7 at AAA (sf)
-- $94.3 million Class A-7-A at AAA (sf)
-- $94.3 million Class A-7-X at AAA (sf)
-- $35.1 million Class A-8 at AAA (sf)
-- $35.1 million Class A-8-A at AAA (sf)
-- $35.1 million Class A-8-X at AAA (sf)
-- $15.2 million Class A-9 at AAA (sf)
-- $15.2 million Class A-9-A at AAA (sf)
-- $15.2 million Class A-9-X at AAA (sf)
-- $44.0 million Class A-10 at AAA (sf)
-- $44.0 million Class A-10-A at AAA (sf)
-- $44.0 million Class A-10-X at AAA (sf)
-- $38.6 million Class A-11 at AAA (sf)
-- $38.6 million Class A-11-X at AAA (sf)
-- $38.6 million Class A-11-A at AAA (sf)
-- $38.6 million Class A-11-AI at AAA (sf)
-- $38.6 million Class A-11-B at AAA (sf)
-- $38.6 million Class A-11-BI at AAA (sf)
-- $38.6 million Class A-12 at AAA (sf)
-- $38.6 million Class A-13 at AAA (sf)
-- $24.3 million Class A-14 at AAA (sf)
-- $24.3 million Class A-15 at AAA (sf)
-- $257.9 million Class A-16 at AAA (sf)
-- $42.0 million Class A-17 at AAA (sf)
-- $299.8 million Class A-X-1 at AAA (sf)
-- $299.8 million Class A-X-2 at AAA (sf)
-- $38.6 million Class A-X-3 at AAA (sf)
-- $24.3 million Class A-X-4 at AAA (sf)
-- $10.4 million Class B-1 at AA (low) (sf)
-- $5.2 million Class B-2 at A (low) (sf)
-- $3.7 million Class B-3 at BBB (low) (sf)
-- $2.6 million Class B-4 at BB (low) (sf)
-- $649.0 thousand Class B-5 at B (sf)
Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-X, A-8-X, A-9-X, A-10-X,
A-11-AI, A-11-BI, A-11-X, A-X-1 A-X-2, A-X-3, and A-X-4 are
interest-only (IO) certificates. The class balances represent
notional amounts.
Classes A-1, A-2, A-3, A-3-A, A-3-X, A-4, A-4-A, A-4-X, A-5, A-5-A,
A-5-X, A-6, A-7, A-7-A, A-7-X, A-8, A-9, A-10, A-11-A, A-11-AI,
A-11-B, A-11-BI, A-12, A-13, A-14, A-16, A-17, A-X-2, and A-X-3 are
exchangeable certificates. These classes can be exchanged for
combinations of exchange certificates.
Classes A-2, A-3, A-3-A, A-4, A-4-A, A-5, A-5-A, A-6, A-6-A, A-7,
A-7-A, A-8, A-8-A, A-9, A-9-A, A-10, A-10-A, A-11, A-11-A, A-11-B,
A-12, and A-13 are super-senior certificates. These classes benefit
from additional protection from the senior support certificates
(Classes A-14 and A-15) with respect to loss allocation.
The AAA (sf) ratings on the Certificates reflect 7.50% of credit
enhancement provided by subordinated certificates. The AA (low)
(sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B (sf)
ratings reflect 4.30%, 2.70%, 1.55%, 0.75%, and 0.55% of credit
enhancement, respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
This securitization is a portfolio of first-lien, fixed-rate prime
conventional investment-property residential mortgages funded by
the issuance of the Certificates. The Certificates are backed by
769 loans with a total principal balance of $324,160,034 as of the
Cut-Off Date (June 1, 2021).
In contrast to loanDepot.com, LLC's (loanDepot) prime MELLO MTG
series, MELLO 2021-INV1 is its first prime securitization composed
of fully amortizing fixed-rate mortgages on non-owner-occupied
residential investment properties. The portfolio consists of
conforming mortgages with original terms to maturity of primarily
30 years, which were underwritten by loanDepot using an automated
underwriting system (AUS) designated by Fannie Mae or Freddie Mac
and were eligible for purchase by such agencies. In addition, the
pool contains a moderate concentration of loans (22.8%) that were
granted appraisal waivers by the agencies. In its analysis, DBRS
Morningstar applied property value haircuts to such loans, which
increased the expected losses on the collateral. Details on the
underwriting of conforming loans can be found in the Key
Probability of Default Drivers section in the related Presale
Report.
LoanDepot is the Originator, Seller, and Servicing Administrator of
the mortgage loans. Mello Credit Strategies LLC is the Sponsor of
the transaction. LD Holdings Group LLC will serve as Guarantor with
respect to the remedy obligations of the Seller. Mello
Securitization Depositor LLC, a subsidiary of the Sponsor and an
affiliate of the Seller, will act as Depositor of the transaction.
Cenlar FSB (Cenlar) will act as the Servicer. Wells Fargo Bank,
N.A. (Wells Fargo; rated AA with a Negative trend by DBRS
Morningstar) will act as the Master Servicer and Securities
Administrator. Wilmington Savings Fund Society, FSB will serve as
Trustee, and Deutsche Bank National Trust Company will serve as
Custodian.
The transaction employs a senior-subordinate, shifting-interest
cash flow structure that is enhanced from a pre-crisis structure.
As of the Cut-Off Date, no borrower within the pool is currently
subject to a Coronavirus Disease (COVID-19)-related forbearance
plan with the Servicer. In the event a borrower requests or enters
into a coronavirus-related forbearance plan after the Cut-Off Date
but prior to the Closing Date, the Seller will remove such loan
from the mortgage pool and remit the related Closing Date
substitution amount. Loans that enter a coronavirus-related
forbearance plan on or after the Closing Date will remain in the
pool.
CORONAVIRUS PANDEMIC IMPACT
The coronavirus pandemic and the resulting isolation measures have
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. DBRS Morningstar saw increases in delinquencies for many
residential mortgage-backed securities (RMBS) asset classes,
shortly after the onset of coronavirus.
Such mortgage delinquencies were mostly in the form of forbearance,
which are generally short-term payment reliefs that may perform
very differently from traditional delinquencies. At the onset of
coronavirus, because the option to forebear mortgage payments was
so widely available, it drove forbearance to a very high level.
When the dust settled, coronavirus-induced forbearance in 2020
performed better than expected, thanks to government aid, low
loan-to-value ratios (LTVs), and good underwriting in the mortgage
market in general. Across nearly all RMBS asset classes,
delinquencies have been gradually trending down in recent months as
forbearance period comes to an end for many borrowers.
In connection with the economic stress assumed under its moderate
scenario (see Global Macroeconomic Scenarios: March 2021 Update,
published on March 17, 2021), DBRS Morningstar may assume higher
loss expectations for pools with loans on forbearance plans.
The ratings reflect transactional strengths that include
high-quality credit attributes, well-qualified borrowers,
structural enhancements, satisfactory third-party due-diligence
review, and 100% current loans.
The ratings reflect transactional weaknesses that include loans
with agency appraisal waivers, 100% investor properties and certain
borrowers with multiple mortgages in the securitized pool, certain
aspects of the representations and warranties framework, and the
servicing administrator's financial capabilities.
Notes: All figures are in U.S. dollars unless otherwise noted.
MELLO MORTGAGE 2021-MTG3: DBRS Gives Prov. B Rating on B5 Certs
---------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Mortgage Pass-Through Certificates, Series 2021-MTG3 (the
Certificates) to be issued by Mello Mortgage Capital Acceptance
2021-MTG3 (MELLO 2021-MTG3):
-- $276.3 million Class A1 at AAA (sf)
-- $276.3 million Class A2 at AAA (sf)
-- $240.9 million Class A3 at AAA (sf)
-- $240.9 million Class A4 at AAA (sf)
-- $35.4 million Class A5 at AAA (sf)
-- $35.4 million Class A6 at AAA (sf)
-- $144.5 million Class A7 at AAA (sf)
-- $144.5 million Class A8 at AAA (sf)
-- $180.7 million Class A9 at AAA (sf)
-- $180.7 million Class A10 at AAA (sf)
-- $35.4 million Class A11 at AAA (sf)
-- $35.4 million Class A11X at AAA (sf)
-- $192.7 million Class A12 at AAA (sf)
-- $192.7 million Class A13 at AAA (sf)
-- $36.1 million Class A14 at AAA (sf)
-- $36.1 million Class A15 at AAA (sf)
-- $12.0 million Class A16 at AAA (sf)
-- $12.0 million Class A17 at AAA (sf)
-- $48.2 million Class A18 at AAA (sf)
-- $48.2 million Class A19 at AAA (sf)
-- $48.2 million Class A20 at AAA (sf)
-- $48.2 million Class A21 at AAA (sf)
-- $60.2 million Class A22 at AAA (sf)
-- $60.2 million Class A23 at AAA (sf)
-- $96.4 million Class A24 at AAA (sf)
-- $96.4 million Class A25 at AAA (sf)
-- $29.3 million Class A26 at AAA (sf)
-- $29.3 million Class A27 at AAA (sf)
-- $29.3 million Class A28 at AAA (sf)
-- $305.5 million Class A29 at AAA (sf)
-- $264.3 million Class A30 at AAA (sf)
-- $305.5 million Class A31 at AAA (sf)
-- $305.5 million Class AX1 at AAA (sf)
-- $240.9 million Class AX4 at AAA (sf)
-- $35.4 million Class AX5 at AAA (sf)
-- $35.4 million Class AX6 at AAA (sf)
-- $144.5 million Class AX8 at AAA (sf)
-- $180.7 million Class AX10 at AAA (sf)
-- $192.7 million Class AX13 at AAA (sf)
-- $36.1 million Class AX15 at AAA (sf)
-- $12.0 million Class AX17 at AAA (sf)
-- $48.2 million Class AX19 at AAA (sf)
-- $48.2 million Class AX21 at AAA (sf)
-- $96.4 million Class AX25 at AAA (sf)
-- $29.3 million Class AX26 at AAA (sf)
-- $29.3 million Class AX27 at AAA (sf)
-- $29.3 million Class AX28 at AAA (sf)
-- $264.3 million Class AX30 at AAA (sf)
-- $7.2 million Class B1 at AA (high) (sf)
-- $7.2 million Class B1A at AA (high) (sf)
-- $7.2 million Class BX1 at AA (high) (sf)
-- $4.2 million Class B2 at A (high) (sf)
-- $4.2 million Class B2A at A (high) (sf)
-- $4.2 million Class BX2 at A (high) (sf)
-- $3.9 million Class B3 at BBB (high) (sf)
-- $2.6 million Class B4 at BB (sf)
-- $488.0 thousand Class B5 at B (sf)
Classes A11X, AX1, AX4, AX5, AX6, AX8, AX10, AX13, AX15, AX17,
AX19, AX21, AX25, AX26, AX27, AX28, AX30, BX1, and BX2 are
interest-only certificates. The class balances represent notional
amounts.
Classes A1, A2, A3, A4, A5, A6, A7, A9, A10, A12, A13, A14, A16,
A18, A19, A20, A22, A23, A24, A25, A26, A27, A29, A30, A31, AX4,
AX5, AX10, AX13, AX19, AX25, AX26, AX30, B1, and B2 are
exchangeable certificates. These classes can be exchanged for
combinations of exchange certificates.
Classes A1, A2, A3, A4, A5, A6, A7, A8, A9, A10, A11, A12, A13,
A14, A15, A16, A17, A18, A19, A20, A21, A22, A23, A24, and A25 are
super-senior certificates. These classes benefit from additional
protection from the senior support certificates (Classes A26, A27,
and A28) with respect to loss allocation.
The AAA (sf) ratings on the Certificates reflect 6.00% of credit
enhancement provided by subordinated certificates. The AA (high)
(sf), A (high) (sf), BBB (high) (sf), BB (sf), and B (sf) ratings
reflect 3.80%, 2.50%, 1.30%, 0.50%, and 0.35% of credit
enhancement, respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
This securitization is a portfolio of first-lien fixed-rate prime
conventional residential mortgages funded by the issuance of the
Certificates. The Certificates are backed by 508 loans with a total
principal balance of $325,006,710 as of the Cut-Off Date (June 1,
2021).
MELLO 2021-MTG3 is the fifth prime securitization issued from the
MELLO shelf MTG series and comprises fully amortizing fixed-rate
mortgages with original terms to maturity of primarily 30 years.
The first two MELLO deals were issued in 2018 and consisted of a
combination of nonagency and agency-eligible prime collateral.
Unlike the first securitizations from 2018, all loans in the MELLO
2021-MTG3 pool are conforming, high-balance mortgage loans that
were underwritten by loanDepot.com, LLC (loanDepot) using an
automated underwriting system designated by Fannie Mae or Freddie
Mac and were eligible for purchase by such agencies. In addition,
the pool contains a large concentration of loans (35.5%) that were
granted appraisal waivers by the agencies. In its analysis, DBRS
Morningstar applied property value haircuts to such loans, which
increased the expected losses on the collateral.
loanDepot is the Originator, Seller, and Servicing Administrator of
the mortgage loans and Artemis Management LLC is the Sponsor of the
transaction. LD Holdings Group LLC, the parent company of the
Sponsor and Seller, will serve as Guarantor with respect to the
remedy obligations of the Seller. LDPMF LLC, a subsidiary of the
Sponsor and an affiliate of the Seller, will act as Depositor of
the transaction.
Cenlar FSB will act as the Servicer. Wells Fargo Bank, N.A. (rated
AA with a Negative trend by DBRS Morningstar) will act as the
Master Servicer and Securities Administrator. Wilmington Savings
Fund Society, FSB will serve as Trustee, and Deutsche Bank National
Trust Company will serve as Custodian.
The transaction employs a senior-subordinate, shifting-interest
cash flow structure that is enhanced from a pre-crisis structure.
As of the Cut-Off Date, no borrower within the pool has entered
into a Coronavirus Disease (COVID-19)-related forbearance plan with
a servicer. In the event a borrower requests or enters into a
forbearance plan after the Closing Date, such loan will remain in
the pool.
Coronavirus Pandemic Impact
The coronavirus pandemic and the resulting isolation measures have
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. Shortly after the onset of the pandemic, DBRS
Morningstar saw an increase in delinquencies for many residential
mortgage-backed securities (RMBS) asset classes.
Such mortgage delinquencies were mostly in the form of
forbearances, which are generally short-term periods of payment
relief that may perform very differently from traditional
delinquencies. At the onset of the pandemic, the option to forebear
mortgage payments was widely available, driving forbearances to an
elevated level. When the dust settled, loans with
coronavirus-induced forbearance in 2020 performed better than
expected, thanks to government aid, low loan-to-value ratios, and
acceptable underwriting in the mortgage market in general. Across
nearly all RMBS asset classes in recent months, delinquencies have
been gradually trending downwards as forbearance periods come to an
end for many borrowers.
In connection with the economic stress assumed under its moderate
scenario (see "Global Macroeconomic Scenarios – June 2021
Update," published on June 18, 2021), DBRS Morningstar may assume
higher loss expectations for pools with loans on forbearance
plans.
Notes: All figures are in U.S. dollars unless otherwise noted.
MELLO MORTGAGE 2021-MTG3: Moody's Assigns (P)B2 Rating to B5 Certs
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
fifty-seven classes of residential mortgage-backed securities
issued by Mello Mortgage Capital Acceptance (MMCA) 2021-MTG3. The
ratings range from (P)Aaa (sf) to (P)B2 (sf).
MMCA 2021-MTG3 is a securitization of first-lien primarily
high-balance GSE-eligible mortgage loans. The transaction is backed
by 508, 30-year (97.9% by balance), 29-year (0.2% by balance),
28-year (0.4% by balance), 26-year (0.2% by balance), and 25-year
(1.3% by balance) fixed-rate mortgage loans, with an aggregate
stated principal balance of $325,006,710, originated by
loanDepot.com, LLC (loanDepot). The average stated principal
balance is $639,777. All the mortgage loans were qualified
mortgages under the Qualified Mortgage (QM) rule because such
mortgages were eligible for purchase by Fannie Mae or Freddie Mac.
Approximately 35.5% of the mortgage loans by aggregate unpaid
principal balance (UPB) are "Appraisal Waiver" (AW) loans, whereby
the sponsor obtained an AW for each such mortgage loan from Fannie
Mae or Freddie Mac through their respective programs. In each case,
neither Fannie Mae nor Freddie Mac required an appraisal of the
related mortgaged property as a condition of approving the related
mortgage loan for purchase by Fannie Mae or Freddie Mac, as
applicable.
Cenlar FSB (Cenlar) will service all the mortgage loans in the
transaction. Wells Fargo Bank, N.A. (Long term debt Aa2) will serve
as the master servicer. The servicing administrator, loanDepot,
will be primarily responsible for funding certain servicing
advances of delinquent scheduled interest and principal payments
for the mortgage loans, unless the servicer determines that such
amounts would not be recoverable. The master servicer will be
obligated to fund any required monthly advance if the servicing
administrator fails in its obligation to do so.
The credit, compliance, property valuation, and data integrity
portion of the third-party review (TPR) was conducted on a total of
approximately 36.2% (184 loans) of the pool (by loan count).
Additional valuation products were ordered on the remaining 324
loans. For each appraisal waiver (AW) loan, there was an Automatic
Valuation Model (AVM) review conducted in connection with this
offering by a third-party vendor with respect to the related
mortgaged properties. There were no AW loans in the pool with AVM
value that had more than -10% variance compared to the stated
value. The TPR results indicated compliance with the originators'
underwriting guidelines for most of the loans, no material
compliance issues and no material appraisal defects. Moody's
calculated the credit-neutral sample size using a confidence
interval, error rate, and a precision level of 95%/5%/2%. The
number of loans that went through a full due-diligence review is
below Moody's calculated threshold, Moody's therefore applied an
adjustment to Moody's losses.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. Moody's also compared the
collateral pool to MMCA 2021-MTG2, MMCA 2021-MTG1, MMCA 2018-MTG2,
Provident Funding Mortgage Trust 2020-2, Provident Funding Mortgage
Trust 2020-1, and Provident Funding Mortgage Trust 2019-1
transactions. Overall, this pool has a weaker credit risk profile
as compared to that of recent comparable transactions with respect
to FICO distribution.
The securitization has a shifting interest structure with a
five-year lockout period that benefits from a senior floor and a
subordinate floor. Moody's coded the cash flow to each of the
certificate classes using Moody's proprietary cash flow tool.
The complete rating actions are as follows:
Issuer: Mello Mortgage Capital Acceptance 2021-MTG3
Cl. A1, Assigned (P)Aaa (sf)
Cl. A2, Assigned (P)Aaa (sf)
Cl. A3, Assigned (P)Aaa (sf)
Cl. A4, Assigned (P)Aaa (sf)
Cl. A5, Assigned (P)Aaa (sf)
Cl. A6, Assigned (P)Aaa (sf)
Cl. A7, Assigned (P)Aaa (sf)
Cl. A8, Assigned (P)Aaa (sf)
Cl. A9, Assigned (P)Aaa (sf)
Cl. A10, Assigned (P)Aaa (sf)
Cl. A11, Assigned (P)Aaa (sf)
Cl. A11X*, Assigned (P)Aaa (sf)
Cl. A12, Assigned (P)Aaa (sf)
Cl. A13, Assigned (P)Aaa (sf)
Cl. A14, Assigned (P)Aaa (sf)
Cl. A15, Assigned (P)Aaa (sf)
Cl. A16, Assigned (P)Aaa (sf)
Cl. A17, Assigned (P)Aaa (sf)
Cl. A18, Assigned (P)Aaa (sf)
Cl. A19, Assigned (P)Aaa (sf)
Cl. A20, Assigned (P)Aaa (sf)
Cl. A21, Assigned (P)Aaa (sf)
Cl. A22, Assigned (P)Aaa (sf)
Cl. A23, Assigned (P)Aaa (sf)
Cl. A24, Assigned (P)Aaa (sf)
Cl. A25, Assigned (P)Aaa (sf)
Cl. A26, Assigned (P)Aa1 (sf)
Cl. A27, Assigned (P)Aa1 (sf)
Cl. A28, Assigned (P)Aa1 (sf)
Cl. A29, Assigned (P)Aaa (sf)
Cl. A30, Assigned (P)Aaa (sf)
Cl. A31, Assigned (P)Aaa (sf)
Cl. AX1*, Assigned (P)Aaa (sf)
Cl. AX4*, Assigned (P)Aaa (sf)
Cl. AX5*, Assigned (P)Aaa (sf)
Cl. AX6*, Assigned (P)Aaa (sf)
Cl. AX8*, Assigned (P)Aaa (sf)
Cl. AX10*, Assigned (P)Aaa (sf)
Cl. AX13*, Assigned (P)Aaa (sf)
Cl. AX15*, Assigned (P)Aaa (sf)
Cl. AX17*, Assigned (P)Aaa (sf)
Cl. AX19*, Assigned (P)Aaa (sf)
Cl. AX21*, Assigned (P)Aaa (sf)
Cl. AX25*, Assigned (P)Aaa (sf)
Cl. AX26*, Assigned (P)Aa1 (sf)
Cl. AX27*, Assigned (P)Aa1 (sf)
Cl. AX28*, Assigned (P)Aa1 (sf)
Cl. AX30*, Assigned (P)Aaa (sf)
Cl. B1, Assigned (P)Aa3 (sf)
Cl. B1A, Assigned (P)Aa3 (sf)
Cl. BX1*, Assigned (P)Aa3 (sf)
Cl. B2, Assigned (P)A3 (sf)
Cl. B2A, Assigned (P)A3 (sf)
Cl. BX2*, Assigned (P)A3 (sf)
Cl. B3, Assigned (P)Baa2 (sf)
Cl. B4, Assigned (P)Ba2 (sf)
Cl. B5, Assigned (P)B2 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario is 0.30%
at the mean, 0.12% at the median, and reaches 6.09% at a stress
level consistent with Moody's Aaa ratings.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US
economy continues on the path toward normalization. Economic
activity will continue to strengthen in 2021 because of several
factors, including the rollout of vaccines, growing household
consumption and an accommodative central bank policy. However,
specific sectors and individual businesses will remain weakened by
extended pandemic related restrictions.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's increased its model-derived median expected losses by 10.0%
(5.6% for the mean) and Moody's Aaa losses by 2.5% to reflect the
likely performance deterioration resulting from a slowdown in US
economic activity in 2020 due to the coronavirus outbreak. These
adjustments are lower than the 15% median expected loss and 5% Aaa
loss adjustments Moody's made on pools from deals issued after the
onset of the pandemic until February 2021. Moody's reduced
adjustments reflect the fact that the loan pool in this deal does
not contain any loans to borrowers who are not currently making
payments. For newly originated loans, post-COVID underwriting takes
into account the impact of the pandemic on a borrower's ability to
repay the mortgage. For seasoned loans, as time passes, the
likelihood that borrowers who have continued to make payments
throughout the pandemic will now become non-cash flowing due to
COVID-19 continues to decline.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the third-party due diligence and the
R&W framework of the transaction.
Collateral description
MMCA 2021-MTG3 is a securitization of first-lien primarily
high-balance GSE-eligible mortgage loans. The transaction is backed
by 508, 30-year (97.9% by balance), 29-year (0.2% by balance),
28-year (0.4% by balance), 26-year (0.2% by balance), and 25-year
(1.3% by balance) fixed-rate mortgage loans, with an aggregate
stated principal balance of $325,006,710, originated by
loanDepot.com, LLC (loanDepot). The average stated principal
balance is $639,777 and the weighted average (WA) current mortgage
rate is 3.1%. Borrowers of the mortgage loans backing this
transaction have strong credit profiles demonstrated by strong
credit scores and low loan-to-value (LTV) ratios. The weighted
average primary borrower original FICO score and original LTV ratio
of the pool is 758 and 65.3%, respectively. The WA original
debt-to-income (DTI) ratio is 33.4%. Approximately, 24.4% by loan
balance of the borrowers in the pool have more than one mortgage.
Also, there is one borrower with two mortgages in this pool. All of
the loans are designated as Qualified Mortgages (QM) under the QM
safe harbor rules. All loans are underwritten to Freddie Mac or
Fannie Mae guidelines with minimal overlays from loanDepot.
Approximately half of the mortgages (52.9% by loan balance) are
backed by properties located in California. The next largest
geographic concentration is Washington (13.7% by loan balance),
Virginia (8.63% by loan balance), and New Jersey (6.72% by loan
balance). All other states each represent 4% or less by loan
balance. Approximately 0.7% (by loan balance) of the pool is backed
by properties that are 2-to-4 unit residential properties whereas
loans backed by single family residential properties represent
62.6% (by loan balance) of the pool.
Approximately 84.9% (by loan balance) of the loans were originated
through the retail channel and 15.1% (by loan balance) of the loans
were originated through the broker channel.
Origination Quality and Underwriting Guidelines
loanDepot has originated all the mortgage loans in the pool. All
mortgage loans were originated generally in accordance with Federal
Housing Finance Agency (FHFA) standards, under loanDepot's
conforming high balance loan program, with no material overlays
imposed by the originator. The underwriting guidelines evaluate,
among others, the borrowers' ability to repay, employment history,
credit history and FICO scores, debt to income ratio (DTI) and
residual income. The mortgage loans were originated using an
automated underwriting system (AUS), DU for Fannie Mae and LP for
Freddie Mac loans, as both a risk screening tool and also to ensure
that the only ineligible factor is the loan amount. For a loan to
get approved, a DU response of "Approve/Eligible" or LP response of
"Accept" is required. Manual underwriting of any loans is not
allowed under the program.
Moody's consider loanDepot's origination quality to be in line with
its peers due to: (1) adequate underwriting policies and
procedures, (2) acceptable performance with low delinquency and
repurchase and (3) adequate quality control. Therefore, Moody's
have not applied an additional adjustment for origination quality.
Servicing arrangement
Moody's consider the overall servicing arrangement for this pool to
be adequate. Cenlar FSB (Cenlar) will service all the mortgage
loans in the transaction. Wells Fargo Bank, N.A. (Long term debt
Aa2) will serve as the master servicer. The servicing
administrator, loanDepot, will be primarily responsible for funding
certain servicing advances of delinquent scheduled interest and
principal payments for the mortgage loans, unless the servicer
determines that such amounts would not be recoverable. The master
servicer will be obligated to fund any required monthly advance if
the servicing administrator fails in its obligation to do so.
Moody's did not make any adjustments to its base case and Aaa
stress loss assumptions based on this servicing arrangement.
Covid-19 Impacted Borrowers
In the event that a borrower enters into or requests a COVID-19
related forbearance plan on or after the closing date, such
mortgage loan will remain in the mortgage pool and the servicing
administrator will be required to make advances in respect of
delinquent interest and principal (as well as servicing advances)
on such mortgage loan during the forbearance period (to the extent
such advances are deemed recoverable). Forbearances are being
offered in accordance with applicable state and federal regulatory
guidelines and the homeowner's individual circumstances. At the end
of the forbearance period, as with any other modification, to the
extent the related borrower is not able to make a lump sum payment
of the forborne amount, the servicer may, subject to the servicing
matrix, offer the borrower a repayment plan, enter into a
modification with the borrower (including a modification to defer
the forborne amounts) or utilize any other loss mitigation option
permitted under the pooling and servicing agreement.
The servicing fee rate will be equal to 8 bps. Under the
transaction documents, the servicing administrator may increase the
servicer fee rate up to 25 bps in the event that servicing
administrator terminates Cenlar as the servicer. The successor
servicer chosen by the servicing administrator must be reasonably
acceptable to the master servicer. The master servicer may increase
the servicing fee up to an amount that in its good faith judgment
is necessary or advisable to engage a successor servicer. In
modeling this transaction, Moody's assumed a 25 bps servicing fee
rate in line with other transactions that have similar servicing
fee structure.
Third-party review
The credit, compliance, property valuation, and data integrity
portion of the third-party review (TPR) was conducted on a total of
approximately 36.2% (184 loans) of the pool (by loan count).
Additional valuation products were ordered on the remaining 324
loans. For each appraisal waiver (AW) loan, there was an Automatic
Valuation Model (AVM) review conducted in connection with this
offering by a third-party vendor with respect to the related
mortgaged properties. There were no AW loans in the pool with AVM
value that had more than -10% variance compared to the stated
value.
The TPR results indicated compliance with the originators'
underwriting guidelines for most of the loans, no material
compliance issues and no material appraisal defects. Moody's
calculated the credit-neutral sample size using a confidence
interval, error rate, and a precision level of 95%/5%/2%. The
number of loans that went through a full due-diligence review is
below Moody's calculated threshold, Moody's therefore applied an
adjustment to Moody's losses.
Also, AW loans, which constitute approximately 35.5% of the
mortgage loans by aggregate cut-off date balance, may present a
greater risk as the value of the related mortgaged properties may
be less than the value ascribed to such mortgaged properties.
Moody's made an adjustment in Moody's analysis to account for the
increased risk associated with such loans.
Representations and Warranties Framework
The R&W provider and the guarantor are both loanDepot entities,
which may not have the financial wherewithal to purchase defective
loans. The Guarantor (LD Holdings Group LLC) will guarantee certain
performance obligations of the R&W provider (loanDepot.com, LLC).
Moreover, unlike other transactions that Moody's have rated, the
R&W framework for this transaction does not include a mechanism
whereby loans that experience an early payment default (EPD) are
repurchased. Moody's have adjusted its Aaa CE and expected losses
to account for these weaknesses in the R&W framework.
Transaction structure
The securitization has a shifting interest structure that benefits
from a senior subordination floor and a subordinate floor. Funds
collected, including principal, are first used to make interest
payments and then principal payments to the senior bonds, and then
interest and principal payments to each subordinate bond. As in all
transactions with shifting interest structures, the senior bonds
benefit from a cash flow waterfall that allocates all prepayments
to the senior bond for a specified period of time, and increasing
amounts of prepayments to the subordinate bonds thereafter, but
only if loan performance satisfies delinquency and loss tests.
Realized losses are allocated in a reverse sequential order, first
to the lowest subordinate bond. After the balances of the
subordinate bonds are written off, losses from the pool begin to
write off the principal balances of the senior support bonds until
their principal balances are reduced to zero. Next, realized losses
are allocated to super senior bonds until their principal balance
is written off.
Tail risk & subordination floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
shrinks, senior bonds are exposed to eroding credit enhancement
over time and increased performance volatility, known as tail risk.
To mitigate this risk, the transaction provides for a senior
subordination floor of 0.60% which mitigates tail risk by
protecting the senior bonds from eroding credit enhancement over
time. Additionally, there is a subordination lock-out amount which
is 0.60% of the closing pool balance.
Moody's calculate the credit neutral floors for a given target
rating as shown in Moody's principal methodology. The senior
subordination floor and the subordinate floor of 0.60% and 0.60%,
respectively, are consistent with the credit neutral floors for the
assigned ratings.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
MF1 2021-FL6: DBRS Finalizes B(low) Rating on Class G Notes
-----------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by MF1 2021-FL6 Ltd.:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
Coronavirus Overview
With regard to the Coronavirus Disease (COVID-19) pandemic, the
magnitude and extent of performance stress posed to global
structured finance transactions remains highly uncertain. This
considers the fiscal and monetary policy measures and statutory law
changes that have already been implemented or will be implemented
to soften the impact of the crisis on global economies. Some
regions, jurisdictions, and asset classes are, however, feeling
more immediate effects. Accordingly, DBRS Morningstar may apply
additional short-term stresses to its rating analysis. For example,
DBRS Morningstar may front-load default expectations and/or assess
the liquidity position of a structured finance transaction with
more stressful operational risk and/or cash flow timing
considerations.
The initial collateral consists of 37 floating-rate mortgage loans
secured by 51 transitional multifamily and one senior housing
property totaling $993.2 million (57.9% of the total fully funded
balance), excluding $101.0 million of remaining future funding
commitments and $620.5 million of pari passu debt. Two loans (LA
Multifamily Portfolio III and SF Multifamily Portfolio III),
representing 1.3% of the trust balance, are associated with the
same sponsorship group and these loans allow the borrower to
acquire and bring properties into the trust post-closing through
future funding up to a maximum whole-loan balance of $100.0 million
for each individual loan, which is accounted for in figures and
metrics throughout the report. Of the 37 loans, there are five
unclosed, delayed-close loans as of June 24, 2021: Park Portfolio
(#3), Venn on Market (#4), and Crystal Tower Apartments (#10),
representing a total initial pool balance of 14.7%. The Issuer has
45 days post-closing to acquire the delayed-close assets.
In addition, the transaction is structured with a 90-day ramp-up
acquisition period whereby the Issuer plans to acquire up to $306.8
million of additional collateral, as well as a 24-month
reinvestment period. After the 90-day ramp-up acquisition period
and the 24-month reinvestment period, the Issuer projects a target
pool balance of $1.3 billion. DBRS Morningstar assessed the ramp
loans using a conservative pool construct and, as a result, the
ramp loans have expected losses above the pool WA loan expected
losses. Reinvestment of principal proceeds during the reinvestment
period is subject to Eligibility Criteria which, among other
criteria, includes a no-downgrade rating agency confirmation (RAC)
by DBRS Morningstar for all new mortgage assets and funded
companion participations exceeding $1.0 million. If a delayed-close
loan is not expected to close or fund prior to the purchase
termination date, the expected purchase price will be credited to
the unused proceeds amount to be used by the Issuer to acquire
ramp-up mortgage assets during the ramp-up acquisition period. Any
funds in excess of $5.0 million after the ramp-up completion date
will be transferred to the payment account and applied as principal
proceeds in accordance with the priority of payments. The
Eligibility Criteria indicates that all loans acquired within the
ramp-up period must be secured by either multifamily, student
housing, or senior housing properties. Furthermore, certain events
within the transaction require the Issuer to obtain RAC. DBRS
Morningstar will confirm that a proposed action or failure to act
or other specified event will not, in and of itself, result in the
downgrade or withdrawal of the current rating. The Issuer is not
required to obtain RAC for acquisitions of companion participations
less than $1.0 million.
The loans are mostly secured by cash flowing assets, many of which
are in a period of transition with plans to stabilize and improve
the asset value. In total, 22 loans, representing 53.1% of the
pool, have remaining future funding participations totaling $101.0
million, which the Issuer may acquire in the future.
For the floating-rate loans, DBRS Morningstar used the one-month
Libor index, which is based on the lower of a DBRS Morningstar
stressed rate that corresponded to the remaining fully extended
term of the loans or the strike price of the interest rate cap with
the respective contractual loan spread added to determine a
stressed interest rate over the loan term. When the debt service
payments were measured against the DBRS Morningstar As-Is Net Cash
Flow (NCF), 28 loans, comprising 74.9% of the pool, had a DBRS
Morningstar As-Is Debt Service Coverage Ratio (DSCR) below 1.00x, a
threshold indicative of elevated default risk. However, the DBRS
Morningstar Stabilized DSCRs for only three loans, representing
5.0% of the initial pool balance, are below 1.00x. The properties
are often transitioning with potential upside in cash flow,
however, DBRS Morningstar does not give full credit to the
stabilization if there are no holdbacks or if other structural
features in place are insufficient to support such treatment.
Furthermore, even with the structure provided, DBRS Morningstar
generally does not assume the assets to stabilize above market
levels.
Seven loans, representing 23.0% of the pool, are in areas
identified as DBRS Morningstar Market Ranks of 7 or 8, which are
generally characterized as highly dense urbanized areas that
benefit from increased liquidity driven by consistently strong
investor demand, even during times of economic stress. DBRS
Morningstar Market Ranks of 7 and 8 benefit from lower default
frequencies than less dense suburban, tertiary, and rural markets.
Urban markets represented in the deal include Los Angeles, Seattle,
New York, and San Francisco.
Fifteen loans, representing 47.3% of the pool balance, have
collateral in Metropolitan Statistical Area (MSA) Group 3, which is
the best-performing group in terms of historical commercial
mortgage-backed securities (CMBS) default rates among the top 25
MSAs. MSA Group 3 has a historical default rate of 17.2%, which is
nearly 10.8 percentage points lower than the overall CMBS
historical default rate of 28.0%.
The pool exhibits a Herfindahl score of 27.4, which is favorable
for a commercial real estate collateralized loan obligation and
notably higher than previous transactions rated by DBRS Morningstar
including MF1 2021-FL5, with a Herfindahl score of 26.9; MF1
2020-FL4, with a Herfindahl score of 13.9; and MF1 2020-FL3, with a
Herfindahl score of 23.1. Per the transaction's Eligibility
Criteria, the Herfindahl score is permitted to be as low as 14.0 at
the conclusion of the ramp-up acquisition period.
Based on the initial pool balances, the overall WA DBRS Morningstar
As-Is DSCR of 0.69x and WA DBRS Morningstar As-Is Loan-to-Value
Ratio (LTV) of 77.1% generally reflect high-leverage financing.
Most of the assets are generally well positioned to stabilize, and
any realized cash flow growth would help to offset a rise in
interest rates and improve the overall debt yield of the loans.
DBRS Morningstar associates its loss severity given default based
on the assets' as-is LTV, which does not assume that the
stabilization plan and cash flow growth will ever materialize. The
DBRS Morningstar As-Is DSCR at issuance does not consider the
sponsor's business plan, as the DBRS Morningstar As-Is NCF was
generally based on the most recent annualized period. The sponsor's
business plan could have an immediate impact on the underlying
asset performance that the DBRS Morningstar As-Is NCF is not
accounting for. When measured against the WA DBRS Morningstar
Stabilized NCF, the WA DBRS Morningstar DSCR is estimated to
improve to 1.23x, suggesting that the properties are likely to have
improved NCFs once the sponsors business plans have been
implemented.
All loans have floating interest rates and are interest only during
the initial term, which ranges from 24 months to 36 months,
creating interest rate risk. The borrowers of all 37 loans have
purchased Libor rate caps, ranging between 0.25% and 3.00%, to
protect against rising interest rates over the term of the loan.
All loans are short term and, even with extension options, have a
fully extended loan term of five years maximum. Additionally, all
loans have extension options and, in order to qualify for these
options, the loans must meet minimum DSCR and LTV requirements.
Sixteen loans, representing 44.5% of the initial trust balance,
amortize on 30-year schedules during all or a portion of their
extension options.
Notes: All figures are in U.S. dollars unless otherwise noted.
MFA 2021-RPL1: DBRS Finalizes B Rating on Class B-2 Notes
---------------------------------------------------------
DBRS, Inc. finalized the following provisional ratings on the
Mortgage-Backed Notes, Series 2021-RPL1 issued by MFA 2021-RPL1
Trust:
-- $376.0 million Class A-1 at AAA (sf)
-- $24.6 million Class A-2 at AA (sf)
-- $16.8 million Class M-1 at A (sf)
-- $17.3 million Class M-2 at BBB (sf)
-- $16.1 million Class B-1 at BB (sf)
-- $17.3 million Class B-2 at B (sf)
The AAA (sf) rating on the Notes reflects 20.55% of credit
enhancement provided by subordinated certificates. The AA (sf), A
(sf), BBB (sf), BB (sf), and B (sf) ratings reflect 15.35%, 11.80%,
8.15%, 4.75%, and 1.10% of credit enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of seasoned performing
and reperforming first-lien residential mortgages funded by the
issuance of the Notes. The Notes are backed by 2,151 loans with a
total principal balance of $473,197,059 as of the Cut-Off Date
(April 30, 2021).
The loans are approximately 181 months seasoned. As of the Cut-Off
Date, 97.7% of the pool is current and 2.3% is 30 days delinquent
under the Mortgage Bankers Association (MBA) method. Approximately
57.5% of the mortgage loans have been 0 x 30 for at least the past
24 months, 80.9% have been 0 x 30 for the past 12 months, and 97.7%
have been 0 x 30 for the past six months.
The portfolio contains 86.4% modified loans. Within the pool, 890
mortgages (44.4%) have non-interest-bearing deferred amounts as of
the Cut-Off Date, which equates to 7.8% of the total principal
balance. The modifications happened more than two years ago for
91.6% of the modified loans.
As the Sponsor, MFA Financial, Inc., or a majority-owned affiliate,
will acquire and retain at least a 5% eligible horizontal interest
in the securities to be issued to satisfy the credit risk retention
requirements. These loans were originated and previously serviced
by various entities through purchases in the secondary market.
The loans will be serviced by Fay Servicing, LLC (60.4%), Select
Portfolio Servicing, Inc. (23.5%), and Planet Home Lending, LLC
(16.1%).
There will be no advancing of delinquent principal or interest on
the mortgages by the Servicers or any other party to the
transaction; however, the Servicers are obligated to make advances
in respect of homeowner's association fees, taxes and insurance,
reasonable costs, and expenses incurred in the course of servicing
and disposing of properties.
The Sponsor will have the option, but not the obligation, to
repurchase any mortgage loan that becomes 60 or more days
delinquent under the MBA at a price equal to the principal balance
of such loan.
On or after the earlier of (1) the three-year anniversary of the
Closing Date or (2) the date when the aggregate principal balance
of the mortgage loans is reduced to 10% of the Cut-Off Date
balance, the Sponsor has the option to purchase all of the Notes at
the Redemption Price. The Redemption Price is equal to (1) the
remaining aggregate note amount of the Notes; (2) accrued and
unpaid interest, including any interest shortfall and net
weighted-average coupon shortfall amounts; (3) unreimbursed post
Cut-Off Date deferred amounts allocated as realized losses; and (4)
any fees and expenses of the transaction parties.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest shortfalls on the
Class A-1 and A-2 Notes, but such shortfalls on Class M-1 and more
subordinate bonds will not be paid until the more senior classes
are retired.
Coronavirus Pandemic Impact
The Coronavirus Disease (COVID-19) pandemic and the resulting
isolation measures have caused an immediate economic contraction,
leading to sharp increases in unemployment rates and income
reductions for many consumers. DBRS Morningstar saw increases in
delinquencies for many residential mortgage-backed securities
(RMBS) asset classes, shortly after the onset of coronavirus.
Such mortgage delinquencies were mostly in the form of forbearance,
which are generally short-term payment reliefs that may perform
very differently from traditional delinquencies. At the onset of
coronavirus, because the option to forebear mortgage payments was
so widely available, it drove forbearance to a very high level.
When the dust settled, coronavirus-induced forbearance in 2020
performed better than expected, thanks to government aid, low
loan-to-value (LTV) ratios, and good underwriting in the mortgage
market in general. Across nearly all RMBS asset classes,
delinquencies have been gradually trending down in recent months as
the forbearance period comes to an end for many borrowers.
In connection with the economic stress assumed under its moderate
scenario (see "Global Macroeconomic Scenarios: March 2021 Update,"
published on March 17, 2021), DBRS Morningstar may assume higher
loss expectations for pools with loans on forbearance plans.
In addition, for this transaction, as permitted by the Coronavirus
Aid, Relief, and Economic Security Act, signed into law on March
27, 2020, 14.3% of the borrowers have completed coronavirus-related
relief plans because the borrowers reported financial hardship
related to the coronavirus pandemic. These forbearance plans
allowed temporary payment holidays, generally followed by repayment
once the forbearance period ends.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2021-3: Fitch Assigns Final B Rating on B-5 Debt
---------------------------------------------------------------
Fitch Ratings has assigned final ratings to Morgan Stanley
Residential Mortgage Loan Trust 2021-3
DEBT RATING PRIOR
---- ------ -----
MSRM 2021-3
A-1 LT AAAsf New Rating AAA(EXP)sf
A-1-IO LT AAAsf New Rating AAA(EXP)sf
A-1A-IO LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-A LT AAAsf New Rating AAA(EXP)sf
A-3A-IO LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-4-A LT AAAsf New Rating AAA(EXP)sf
A-4A-IO LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-5-A LT AAAsf New Rating AAA(EXP)sf
A-5A-IO LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-6-IO LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-8-IO LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-9-IO LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT Bsf New Rating B(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch rates the residential mortgage-backed certificates issued by
Morgan Stanley Residential Mortgage Loan Trust 2021-3 (MSRM 2021-3)
as indicated above.
This is the sixth post-crisis transaction off the MSRM Trust shelf.
The first transaction was issued in 2014. This is the fourth MSRM
transaction that comprises loans from various sellers and acquired
by Morgan Stanley in its prime jumbo aggregation process.
The certificates are supported by 338 prime-quality loans with a
total balance of approximately $312.43 million as of the cutoff
date. The servicer in this transaction is Specialized Loan
Servicing LLC (SLS). Nationstar Mortgage LLC will be the master
servicer.
Of the loans, 100.0% qualify as safe harbor qualified mortgage
(SHQM) or agency-eligible temporary QM loans.
There is no exposure to Libor in this transaction. The collateral
comprise of 100% fixed-rate loans from various mortgage
originators, and the certificates are fixed rate and capped at the
net weighted average coupon (WAC), are floating- or inverse
floating-rate bonds based off of the SOFR index and capped at the
net WAC or are based on the net WAC.
Like other prime transactions, the transaction utilizes a
senior-subordinate, shifting-interest structure with subordination
floors to protect against tail risk.
Since the presale was published, six loans were dropped from the
pool. This had no impact on Fitch's loss expectations and did not
impact the assigned ratings.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
30-year fixed-rate fully amortizing loans, seasoned approximately
five months in aggregate as determined by Fitch (three months, per
the transaction documents). Most of the loans were originated
through the sellers' retail channels. The borrowers in this pool
have strong credit profiles (776 FICO as determined by Fitch) and
relatively low leverage (74.3% sustainable loan to value [sLTV]
ratio as determined by Fitch). Ninety-two loans are over $1
million, and the largest totals $2.77 million. Fitch considered
100% of the loans in the pool to be fully documented loans.
Shifting-Interest Structure (Mixed): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
CE Floor (Positive): A CE or senior subordination floor of 1.60%
has been considered to mitigate potential tail-end risk and loss
exposure for senior tranches as pool size declines and performance
volatility increases due to adverse loan selection and small loan
count concentration. A junior subordination floor of 1.00% has been
considered to mitigate potential tail-end risk and loss exposure
for subordinate tranches as pool size declines and performance
volatility increases due to adverse loan selection and small loan
count concentration.
Macro or Sector Risk (Positive): Consistent with the "Additional
Scenario Analysis" section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to Fitch's macroeconomic baseline scenario,
or if actual performance data indicate the current assumptions
require reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data, and the unexpected
development in the health crisis arising from the advancement and
availability of coronavirus vaccines, Fitch reconsidered the
application of the coronavirus-related ERF floors of 2.0 and used
ERF floors of 1.5 and 1.0 for the 'BBsf' and 'Bsf' rating stresses,
respectively. Fitch's March 2021 Global Economic Outlook and
related base-line economic scenario forecasts have been revised to
a 6.2% U.S. GDP growth for 2021 and 3.3% for 2022 following a
negative 3.5% GDP growth in 2020.
Additionally, Fitch's U.S. unemployment forecasts for 2021 and 2022
are 5.8% and 4.7%, respectively, down from 8.1% in 2020. These
revised forecasts support Fitch reverting to the 1.5 and 1.0 ERF
floors described in its "U.S. RMBS Loan Loss Model Criteria."
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses were conducted at
the state and national levels to assess the effect of higher MVDs
for the subject pool as well as lower MVDs, illustrated by a gain
in home prices.
Factor that could, individually or collectively, lead to a negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 40.5% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factor that could, individually or collectively, lead to a positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC, Digital Risk, and Infinity. The third-party
due diligence described in Form 15E focused on four areas:
compliance review, credit review, valuation review and data
integrity. Fitch considered this information in its analysis and,
as a result, Fitch did not make any adjustment(s) to its analysis
based on the findings. Due to the fact that there was 100% due
diligence provided and there were no material findings, Fitch
reduced the 'AAAsf' expected loss by 0.22%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC, Digital Risk, and Infinity were engaged to perform the
review. Loans reviewed under this engagement were given compliance,
credit and valuation grades, and assigned initial grades for each
subcategory. Minimal exceptions and waivers were noted in the due
diligence reports. Refer to the Third-Party Due Diligence section
of the presale report for more detail.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered to be
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
NEUBERGER BERMAN 37: S&P Assigns BB- (sf) Rating on Class E-R Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement notes from Neuberger Berman Loan Advisers
CLO 37 Ltd./Neuberger Berman Loan Advisers CLO 37 LLC, a CLO
originally issued in 2020 that is managed by Neuberger Berman Loan
Advisers II LLC.
On the June 25, 2021, refinancing date, the proceeds from the
replacement notes redeemed the original notes. At that time, S&P
withdrew its ratings on the original notes and assigned ratings to
the replacement notes.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class notes were issued at a lower weighted
average cost of debt than the existing notes.
-- The stated maturity and the reinvestment period are both
unchanged.
-- The transaction added the ability to purchase loss mitigation
obligation and is updating benchmark replacement language.
-- Certain concentration limitations were updated.
-- The required minimum overcollateralization and interest
diversion test were amended.
-- Of the identified underlying collateral obligations, 99.56%
have credit ratings assigned by S&P Global Ratings.
-- Of the identified underlying collateral obligations, 96.43%
have recovery ratings assigned by S&P Global Ratings.
Replacement And Original Note Issuances
Replacement notes
Class A-R, $256 million: Three-month LIBOR + 0.97%
Class B-R, $48 million: Three-month LIBOR + 1.45%
Class C-R (deferrable), $24 million: Three-month LIBOR + 1.80%
Class D-R (deferrable), $24 million: Three-month LIBOR + 2.85%
Class E-R (deferrable), $16 million: Three-month LIBOR + 5.75%
Original notes
Class A-1, $240 million: Three-month LIBOR + 1.75%
Class A-2, $8 million: Three-month LIBOR + 1.90%
Class B, $52 million: Three-month LIBOR + 2.20%
Class C (deferrable), $24 million: Three-month LIBOR + 2.50%
Class D (deferrable), $22 million: Three-month LIBOR + 4.00%
Class E (deferrable), $14 million: Three-month LIBOR + 7.05%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Ratings Assigned
Neuberger Berman Loan Advisers CLO 37 Ltd./Neuberger Berman Loan
Advisers CLO 37 LLC
Class A-R, $256.0 million: AAA (sf)
Class B-R, $48.0 million: AA (sf)
Class C-R (deferrable), $24.0 million: A (sf)
Class D-R (deferrable), $24.0 million: BBB- (sf)
Class E-R (deferrable), $16.0 million: BB- (sf)
Subordinated notes, $38.4 million: Not rated
Ratings Withdrawn
Neuberger Berman Loan Advisers CLO 37 Ltd./Neuberger Berman Loan
Advisers CLO 37 LLC
Class A-1 to not rated from 'AAA (sf)'
Class A-2 to not rated from 'AAA (sf)'
Class B to not rated from 'AA (sf)'
Class C to not rated from 'A (sf)'
Class D to not rated from 'BBB- (sf)'
Class E to not rated from 'BB- (sf)'
NEUBERGER BERMAN 42: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Neuberger Berman Loan
Advisers CLO 42 Ltd./Neuberger Berman Loan Advisers CLO 42 LLC's
floating-rate debt.
The issuance is a CLO transaction backed by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term loans
and governed by collateral quality tests. The transaction is
managed by Neuberger Berman Loan Advisers II LLC.
The ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Neuberger Berman Loan Advisers CLO 42 Ltd./Neuberger Berman Loan
Advisers CLO 42 LLC
Class A, $179.00 million: AAA (sf)
Class A-L loans, $190.00 million: AAA (sf)
Class A-L notes, $0.0 million: AAA (sf)(i)
Class B, $87.00 million: AA (sf)
Class C (deferrable), $36.00 million: A (sf)
Class D (deferrable), $36.00 million: BBB- (sf)
Class E (deferrable), $22.50 million: BB- (sf)
Subordinated notes, $58.00 million: Not rated
(i)The outstanding principal amount of the class A-L notes is zero
at closing and may be increased up to $190.0 million following
exercise of the conversion option for the class A-L loans.
NEUBERGER BERMAN 43: S&P Assigns Prelim BB- (sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Neuberger
Berman Loan Advisers CLO 43 Ltd./Neuberger Berman Loan Advisers CLO
43 LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Neuberger Berman Loan Advisers II
LLC.
The preliminary ratings are based on information as of June 30,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Neuberger Berman Loan Advisers CLO 43 Ltd./Neuberger Berman Loan
Advisers CLO 43 LLC
Class A, $366.00 million: AAA (sf)
Class B, $90.00 million: AA (sf)
Class C (deferrable), $36.00 million: A (sf)
Class D (deferrable), $34.50 million: BBB- (sf)
Class E (deferrable), $22.50 million: BB- (sf)
Subordinated notes, $63.50 million: Not rated
NIAGARA PARK: S&P Assigns Prelim BB-(sf) Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
B-R, C-R, D-R, and E-R replacement notes from Niagara Park CLO
Ltd., a CLO originally issued in 2019 that is managed by
GSO/Blackstone Debt Funds Management. S&P did not rate the
replacement class A-R notes.
The preliminary ratings are based on information as of June 30,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the July 19,2021, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The non-call period will be reestablished as July 17, 2022.
-- The replacement class notes will be issued at a lower weighted
average cost of debt than the existing notes.
-- The stated maturity and the reinvestment period will both be
unchanged.
-- The weighted average life test will be extended to eight years
from the refinancing date.
-- The LIBOR replacement language will be amended/updated.
Replacement And Original Note Issuances
Replacement notes
Class A-R, $288.000 million: Three-month LIBOR + 1.00%
Class B-R, $51.300 million: Three-month LIBOR + 1.60%
Class C-R, $28.575 million: Three-month LIBOR + 2.10%
Class D-R, $27.000 million: Three-month LIBOR + 3.10%
Class E-R, $14.175 million: Three-month LIBOR + 5.95%
Original notes
Class A, $288.000 million: Three-month LIBOR + 1.30%
Class B, $51.300 million: Three-month LIBOR + 1.80%
Class C, $28.575 million: Three-month LIBOR + 2.40%
Class D, $27.000 million: Three-month LIBOR + 3.55%
Class E, $14.175 million: Three-month LIBOR + 6.45%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Niagara Park CLO Ltd./Niagara Park CLO LLC
Class A-R, $288.000 million: Not rated
Class B-R, $51.300 million: AA (sf)
Class C-R, $28.575 million: A (sf)
Class D-R, $27.000 million: BBB- (sf)
Class E-R, $14.175 million: BB- (sf)
OBX 2021-NQM2: S&P Assigns B+ (sf) Rating on Class B-2 Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to OBX 2021-NQM2 Trust's
mortgage pass-through notes series 2021-2.
The note issuance is an RMBS transaction backed by first-lien,
fixed- and adjustable-rate, fully amortizing, and interest-only
residential mortgage loans primarily secured by single-family
residences, planned-unit developments, condominiums, and two- to
four-family homes to both prime and nonprime borrowers. The pool
has 619 loans, which are primarily nonqualified mortgage/
ability-to-repay (ATR) compliant and ATR-exempt loans.
The ratings reflect our view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, geographic concentration, and representation and
warranty framework;
-- The mortgage aggregator, Onslow Bay Financial LLC; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and liquidity
available in the transaction.
Ratings Assigned(i)
OBX 2021-NQM2 Trust
Class A-1, $301,367,000: AAA (sf)
Class A-2, $21,620,000: AA (sf)
Class A-3, $30,832,000: A (sf)
Class M-1, $11,092,000: BBB (sf)
Class B-1, $6,392,000: BB (sf)
Class B-2, $3,384,000: B+ (sf)
Class B-3, $1,316,964: NR
Class A-IO-S, notional(ii): NR
Class XS, notional(iii): NR
Class R: NR
(i)The collateral and structural information in this report
reflects the private placement memorandum dated June 18, 2021; the
ratings address the ultimate payment of interest and principal.
(ii)For the class A-IO-S notes, notional amount equals the loans'
stated principal balance for loans serviced by Select Portfolio
Servicing Inc., Specialized Loan Servicing LLC., and Shellpoint
Mortgage Servicing.
(iii)The notional amount equals the loans' aggregate stated
principal balance.
NR--Not rated.
OCEAN TRAILS XI: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Ocean Trails
CLO XI/Ocean Trails CLO LLC's fixed- and floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Five Arrows Managers North America
LLC.
The preliminary ratings are based on information as of June 23,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
S&P Global Ratings believes there remains a high degree of
uncertainty about the evolution of the coronavirus pandemic.
Reports that at least one experimental vaccine is highly effective
and might gain initial approval by the end of the year are
promising, but this is merely the first step toward a return to
social and economic normality; equally critical is the widespread
availability of effective immunization, which could come by the
middle of next year. S&P said, "We use this assumption in assessing
the economic and credit implications associated with the pandemic.
As the situation evolves, we will update our assumptions and
estimates accordingly."
Preliminary Ratings Assigned
Ocean Trails CLO XI/Ocean Trails CLO LLC
Class A, $248.00 million: AAA (sf)
Class B, $56.00 million: AA (sf)
Class C-1 (deferrable), $17.00 million: A (sf)
Class C-2 (deferrable), $7.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $16.00 million: BB- (sf)
Subordinated notes, $37.71 million: Not rated
OHA CREDIT 3: S&P Assigns Prelim BB-(sf) Rating on Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
X-R, A-R, B-R, C-R, D-R, and E-R replacement notes from OHA Credit
Funding 3 Ltd./OHA Credit Funding 3 LLC, a CLO originally issued
July 2, 2019, that is managed by Oak Hill Advisors L.P.
The preliminary ratings are based on information as of June 29,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the July 2, 2021, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The non-call period will be extended by approximately two years
to July 2, 2023.
-- The reinvestment period will be by extended approximately two
years to July 2, 2026.
-- The legal final maturity date (of the replacement notes and the
existing subordinated notes) will be extended by approximately
three years to July 2, 2035.
-- The weighted average life test will be extended to 10 years
from the refinancing date.
-- No additional assets will be purchased on the first refinancing
date, and the target initial par amount will remain at $700
million. There will not be an additional effective date or ramp-up
period, and the first payment date following the refinancing is
Oct. 20, 2021.
-- The class X-R notes will be issued on the first refinancing
date and are expected to be paid down using interest proceeds
during the first eight payment dates in equal installments of
$187,500 beginning on the first payment date and ending July 20,
2023.
-- The required minimum overcollateralization and interest
coverage ratios will be amended.
-- There will be no additional subordinated notes issued on the
refinancing date.
-- The transaction is adding the ability to purchase
workout-related assets. In addition, the transaction has adopted
benchmark replacement language and made updates to conform to
current rating agency methodology.
-- The original indenture is being discharged, and a new indenture
will be put in place on the refinancing date.
Replacement And Original Note Issuances
Replacement notes
Class X-R, $1.50 million: Three-month LIBOR + 0.60%
Class A-R, $434.00 million: Three-month LIBOR + 1.14%
Class B-R, $98.00 million: Three-month LIBOR + 1.65%
Class C-R (deferrable), $42.00 million: Three-month LIBOR +
1.95%
Class D-R (deferrable), $42.00 million: Three-month LIBOR +
2.90%
Class E-R (deferrable), $26.50 million: Three-month LIBOR +
6.25%
Subordinated notes, $64.50 million: Not applicable
Original notes
Class X, $0.86 million: Three-month LIBOR + 0.65%
Class A-1, $427.00 million: Three-month LIBOR + 1.32%
Class A-2, $24.50 million: Three-month LIBOR + 1.65%
Class B-1, $63.00 million: Three-month LIBOR + 1.80%
Class B-2, $17.50 million: 4.06%
Class C (deferrable), $42.00 million: Three-month LIBOR + 2.45%
Class D (deferrable), $38.50 million: Three-month LIBOR + 3.55%
Class E-1 (deferrable), $14.00 million: Three-month LIBOR +
5.00%
Class E-2 (deferrable), $14.00 million: Three-month LIBOR +
5.50%
Subordinated notes, $64.50 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
OHA Credit Funding 3 Ltd./OHA Credit Funding 3 LLC
Class X-R, $1.50 million: AAA (sf)
Class A-R, $434.00 million: AAA (sf)
Class B-R, $98.00 million: AA (sf)
Class C-R (deferrable), $42.00 million: A (sf)
Class D-R (deferrable), $42.00 million: BBB- (sf)
Class E-R (deferrable), $26.50 million: BB- (sf)
Subordinated notes, $64.50 million: Not rated
Other Outstanding Ratings
OHA Credit Funding 3 Ltd./OHA Credit Funding 3 LLC
Class X, $0.85714285 million: AAA (sf)
Class A-1, $427.00 million: AAA (sf)
Class A-2, $24.50 million: Not rated
Class B-1, $63.00 million: AA (sf)
Class B-2, $17.50 million: AA (sf)
Class C (deferrable), $42.00 million: A (sf)
Class D (deferrable), $38.50 million: BBB- (sf)
Class E-1 (deferrable), $14.00 million: BB- (sf)
Class E-2 (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $64.50 million: Not rated
POINT AU ROCHE: S&P Assigns Prelim BB-(sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Point Au
Roche Park CLO Ltd./Point Au Roche Park CLO LLC 's floating- and
fixed-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Blackstone CLO Management LLC.
The preliminary ratings are based on information as of June 24,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Point Au Roche Park CLO Ltd. /Point Au Roche Park CLO LLC
Class A, $279.00 million: AAA (sf)
Class B-1, $57.00 million: AA (sf)
Class B-2, $6.00 million: AA (sf)
Class C (deferrable), $27.00 million: A (sf)
Class D (deferrable), $27.00 million: BBB- (sf)
Class E (deferrable), $18.00 million: BB- (sf)
Subordinated notes, $43.33 million: not rated
RATE MORTGAGE 2021-J1: Moody's Assigns (P)B3 Rating to B-5 Certs
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 82
classes of residential mortgage-backed securities issued by RATE
Mortgage Trust 2021-J1. The ratings range from (P)Aaa (sf) to (P)B3
(sf).
RATE 2021-J1 is the first issue from Guaranteed Rate, Inc.
(Guaranteed Rate or GRI), the sponsor of the transaction. RATE
2021-J1 is a securitization of first-lien prime jumbo and agency
eligible mortgage loans. The transaction is backed by 319 (81.2% by
unpaid principal balance) and 102 (18.8% by unpaid principal
balance) 30-year fixed rate prime jumbo and agency eligible
mortgage loans, respectively, with an aggregate stated principal
balance of $371,503,002. All the loans in the pool are originated
by Guaranteed Rate. Borrowers of the mortgage loans backing this
transaction have strong credit profiles demonstrated by strong
credit scores and low loan-to-value (LTV) ratios. No borrower under
any mortgage loan is currently in an active COVID-19 related
forbearance plan with the servicer. All mortgage loans are current
as of the cut-off date.
Similar to the recently rated RCKT Mortgage Trust 2021-1 and RCKT
2021-2 transactions, RATE 2021-J1 contains a structural deal
mechanism according to which the servicing administrator will not
advance principal and interest (P&I) to mortgage loans that are 120
days or more delinquent. Here, the servicing administrator will be
responsible for funding any advance of delinquent monthly payments
of principal and interest due but not received by the servicer on
the mortgage loans. The sponsor and the servicing administrator are
the same party, GRI.
One third-party review (TPR) firm verified the accuracy of the loan
level information that Moody's received from the sponsor. This firm
conducted detailed credit, property valuation, data accuracy and
compliance reviews on 421 mortgage loans in the collateral pool.
ServiceMac, LLC (ServiceMac) will service all of the Mortgage Loans
as of the Cut-off Date. Wells Fargo Bank, N.A. (Wells Fargo) will
be the master servicer. Moody's consider the presence of a strong
master servicer to be a mitigant against the risk of any servicing
disruptions.
The transaction has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and
a subordinate floor. Moody's coded the cash flow for each of the
certificate classes using Moody's proprietary cash flow tool.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model.
The complete rating actions are as follows:
Issuer: RATE Mortgage Trust 2021-J1
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aaa (sf)
Cl. A-15, Assigned (P)Aaa (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-18, Assigned (P)Aaa (sf)
Cl. A-19, Assigned (P)Aaa (sf)
Cl. A-20, Assigned (P)Aaa (sf)
Cl. A-21, Assigned (P)Aaa (sf)
Cl. A-22, Assigned (P)Aaa (sf)
Cl. A-23, Assigned (P)Aaa (sf)
Cl. A-24, Assigned (P)Aaa (sf)
Cl. A-25, Assigned (P)Aaa (sf)
Cl. A-26, Assigned (P)Aaa (sf)
Cl. A-27, Assigned (P)Aaa (sf)
Cl. A-28, Assigned (P)Aaa (sf)
Cl. A-29, Assigned (P)Aaa (sf)
Cl. A-30, Assigned (P)Aaa (sf)
Cl. A-31, Assigned (P)Aa1 (sf)
Cl. A-32, Assigned (P)Aa1 (sf)
Cl. A-33, Assigned (P)Aa1 (sf)
Cl. A-34, Assigned (P)Aaa (sf)
Cl. A-35, Assigned (P)Aaa (sf)
Cl. A-36, Assigned (P)Aaa (sf)
Cl. A-X-1*, Assigned (P)Aaa (sf)
Cl. A-X-2*, Assigned (P)Aaa (sf)
Cl. A-X-3*, Assigned (P)Aaa (sf)
Cl. A-X-4*, Assigned (P)Aaa (sf)
Cl. A-X-5*, Assigned (P)Aaa (sf)
Cl. A-X-6*, Assigned (P)Aaa (sf)
Cl. A-X-7*, Assigned (P)Aaa (sf)
Cl. A-X-8*, Assigned (P)Aaa (sf)
Cl. A-X-9*, Assigned (P)Aaa (sf)
Cl. A-X-10*, Assigned (P)Aaa (sf)
Cl. A-X-11*, Assigned (P)Aaa (sf)
Cl. A-X-12*, Assigned (P)Aaa (sf)
Cl. A-X-13*, Assigned (P)Aaa (sf)
Cl. A-X-14*, Assigned (P)Aaa (sf)
Cl. A-X-15*, Assigned (P)Aaa (sf)
Cl. A-X-16*, Assigned (P)Aaa (sf)
Cl. A-X-17*, Assigned (P)Aaa (sf)
Cl. A-X-18*, Assigned (P)Aaa (sf)
Cl. A-X-19*, Assigned (P)Aaa (sf)
Cl. A-X-20*, Assigned (P)Aaa (sf)
Cl. A-X-21*, Assigned (P)Aaa (sf)
Cl. A-X-22*, Assigned (P)Aaa (sf)
Cl. A-X-23*, Assigned (P)Aaa (sf)
Cl. A-X-24*, Assigned (P)Aaa (sf)
Cl. A-X-25*, Assigned (P)Aaa (sf)
Cl. A-X-26*, Assigned (P)Aaa (sf)
Cl. A-X-27*, Assigned (P)Aaa (sf)
Cl. A-X-28*, Assigned (P)Aaa (sf)
Cl. A-X-29*, Assigned (P)Aaa (sf)
Cl. A-X-30*, Assigned (P)Aaa (sf)
Cl. A-X-31*, Assigned (P)Aaa (sf)
Cl. A-X-32*, Assigned (P)Aa1 (sf)
Cl. A-X-33*, Assigned (P)Aa1 (sf)
Cl. A-X-34*, Assigned (P)Aa1 (sf)
Cl. A-X-35*, Assigned (P)Aaa (sf)
Cl. A-X-36*, Assigned (P)Aaa (sf)
Cl. A-X-37*, Assigned (P)Aaa (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-1A, Assigned (P)Aa3 (sf)
Cl. B-X-1*, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-2A, Assigned (P)A3 (sf)
Cl. B-X-2*, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario-mean is
0.23%, in a baseline scenario-median is 0.10%, and reaches 2.70% at
a stress level consistent with Moody's Aaa ratings.
The action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US
economy continues on the path toward normalization. Economic
activity will continue to strengthen in 2021 because of several
factors, including the rollout of vaccines, growing household
consumption and an accommodative central bank policy. However,
specific sectors and individual businesses will remain weakened by
extended pandemic related restrictions.
Moody's increased its model-derived median expected losses by
10.00% (6.04% for the mean) and Moody's Aaa loss by 2.50% to
reflect the likely performance deterioration resulting from the
slowdown in US economic activity due to the coronavirus outbreak.
These adjustments are lower than the 15% median expected loss and
5% Aaa loss adjustments Moody's made on pools from deals issued
after the onset of the pandemic until February 2021. Moody's
reduced adjustments reflect the fact that the loan pool in this
deal does not contain any loans to borrowers who are not currently
making payments. For newly originated mortgage loans, post-COVID
underwriting takes into account the impact of the pandemic on a
borrower's ability to repay the mortgage. For seasoned mortgage
loans, as time passes, the likelihood that borrowers who have
continued to make payments throughout the pandemic will now become
non-cash flowing due to COVID-19 continues to decline.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the TPR and the representations and
warranties (R&W) framework, and the transaction's legal structure
and documentation.
Collateral Description
In general, the borrowers have high FICO scores, high income,
significant liquid assets and a stable employment history, all of
which have been verified as part of the underwriting process and
reviewed by the TPR firm. All the loans were originated through the
retail channel. The borrowers have a high weighted average total
monthly income of $29,483, significant weighted average liquid cash
reserves of $292,405 (approximately 62.9% of the pool has more than
24 months of mortgage payments in reserve), and sizeable equity in
their properties (weighted average LTV of 70.8%, CLTV of 71.1%).
The pool has approximately one month of seasoning as of June 1,
2021, and all loans have been current since origination. All of the
mortgages loans in RATE 2021-J1 are qualified mortgages (QM)
meeting the requirements of the safe harbor provision under the QM
rule.
Origination Quality
Guaranteed Rate has originated 100% of the loan pool. Moody's
consider Guaranteed Rate to be an acceptable originator of agency
eligible and prime jumbo loans following a detailed review of its
underwriting guidelines, quality control processes, policies and
procedures, technology infrastructure, disaster recovery plan, and
historical performance information relative to its peers.
Therefore, Moody's did not apply a separate adjustment for
origination quality.
Founded in 2000 by Victor Ciardelli, Guaranteed Rate is the largest
non-bank jumbo mortgage originator in the U.S. and 3rd largest
retail originator overall (as of Q1 2021). Headquartered in
Chicago, the company has approximately 350+ branch offices across
the U.S. and is licensed in all 50 states and Washington, D.C. The
company employs over 6,500 employees nationwide. In 2020 Guaranteed
Rate funded nearly $74B in total loan volume ($9B from jumbo
loans), up 100% from 2019. The company invests heavily in
technology. Guaranteed Rate originates primarily through its retail
channels and focuses primarily on purchase, agency eligible loans.
The company is an approved Ginnie Mae, Fannie Mae, and Freddie Mac
lender.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool to
be adequate. ServiceMac has the necessary processes, staff,
technology and overall infrastructure in place to effectively
service a transaction. Wells Fargo is responsible for servicer
oversight, the termination of servicers and the appointment of
successor servicers. Moody's consider the presence of an
experienced master servicer such as Wells Fargo to be a mitigant
for any servicing disruptions. Wells Fargo has been engaged in the
business of master servicing for over 20 years. As a result,
Moody's did not make any adjustments to Moody's base case and Aaa
stress loss assumptions based on the servicing arrangement.
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit and property valuation. The due
diligence results confirm compliance with the originator's
underwriting guidelines for the vast majority of loans, no material
regulatory compliance issues, and no material property valuation
issues. The loans that had exceptions to the originator's
underwriting guidelines had significant compensating factors that
were documented.
Representations & Warranties
Moody's evaluate the R&W framework based on three factors: (a) the
financial strength of the remedy provider; (b) the strength of the
R&Ws (including qualifiers and sunsets) and (c) the effectiveness
of the enforcement mechanisms. Moody's evaluated the impact of
these factors collectively on the ratings in conjunction with the
transaction's specific details and in some cases, the strengths of
some of the factors can mitigate weaknesses in others. Moody's also
considered the R&W framework in conjunction with other transaction
features, such as the independent due diligence, custodial receipt,
and property valuations, as well as any sponsor alignment of
interest, to evaluate the overall exposure to loan defects and
inaccurate information. Overall, Moody's consider the R&W framework
for this transaction to be adequate, generally consistent with that
of other prime jumbo transactions which Moody's rated. However,
Moody's applied an adjustment to Moody's losses to account for the
risk that the R&W provider (unrated) may be unable to repurchase
defective loans in a stressed economic environment
Transaction Structure
RATE 2021-J1 has one pool with a shifting interest structure that
benefits from a subordination floor. Funds collected, including
principal, are first used to make interest payments and then
principal payments to the senior bonds, and then interest and
principal payments to each subordinate bond. As in all transactions
with shifting interest structures, the senior bonds benefit from a
cash flow waterfall that allocates all prepayments to the senior
bond for a specified period of time, and increasing amounts of
prepayments to the subordinate bonds thereafter, but only if loan
performance satisfies delinquency and loss tests.
Similar to the recently rated RCKT Mortgage Trust 2021-1 and RCKT
2021-2 transactions, RATE 2021-J1 contains a structural deal
mechanism according to which the servicing administrator will not
advance principal and interest to loans that are 120 days or more
delinquent. Although this feature lowers the risk of high advances
that may negatively affect the recoveries on liquidated loans, the
reduction in interest distribution amount is credit negative to the
subordinate certificates.
The balance and the interest accrued on these "Stop Advance
Mortgage Loans (SAML)" will be removed from the calculation of the
principal and interest distribution amounts with respect to the
seniors and subordinate bonds. The interest distribution amount
will be reduced by the interest accrued on the SAML loans. This
reduction will be allocated first to the subordinate certificates
and then to the senior certificates in the reverse order of payment
priority. In the case of the senior certificates, such reduction in
distribution amounts, are allocated (i) first to the senior support
and (ii) then to the super senior classes, on a pro rata basis.
Once a SAML is liquidated, the net recovery from that loan's
liquidation is included in available funds and thus follows the
transaction's priority of payment. However, the reimbursement of
stop advance shortfalls happens only after liquidation or curing of
SAML. As a result, higher delinquencies could lead to higher
shortfalls especially for the subordinate bonds as compared to a
transaction without the stop advance feature.
While the transaction is backed by collateral with strong credit
characteristics, Moody's considered scenarios in which the
delinquency pipeline rises, especially due to the current
coronavirus environment, and results in higher shortfalls for the
certificates outstanding. In Moody's analysis, Moody's have
considered the additional interest shortfall that the certificates
may incur due to the transaction's stop-advance feature.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 1.00% of the cut-off date pool
balance, and as subordination lock-out amount of 1.00% of the
cut-off date pool balance. The floors are consistent with the
credit neutral floors for the assigned ratings according to Moody's
methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
RCKT MORTGAGE 2021-2: Fitch Rates Class B-5 Certificates 'Bsf'
--------------------------------------------------------------
Fitch Ratings rates the residential mortgage-backed certificates
issued by RCKT Mortgage Trust 2021-2 (RCKT 2021-2).
DEBT RATING PRIOR
---- ------ -----
RCKT Mortgage Trust 2021-2
A-1 LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-X-1 LT AAAsf New Rating AAA(EXP)sf
A-X-10 LT AAAsf New Rating AAA(EXP)sf
A-X-11 LT AAAsf New Rating AAA(EXP)sf
A-X-12 LT AAAsf New Rating AAA(EXP)sf
A-X-13 LT AAAsf New Rating AAA(EXP)sf
A-X-14 LT AAAsf New Rating AAA(EXP)sf
A-X-1A LT AAAsf New Rating AAA(EXP)sf
A-X-1B LT AAAsf New Rating AAA(EXP)sf
A-X-2 LT AAAsf New Rating AAA(EXP)sf
A-X-3 LT AAAsf New Rating AAA(EXP)sf
A-X-4 LT AAAsf New Rating AAA(EXP)sf
A-X-5 LT AAAsf New Rating AAA(EXP)sf
A-X-6 LT AAAsf New Rating AAA(EXP)sf
A-X-7 LT AAAsf New Rating AAA(EXP)sf
A-X-8 LT AAAsf New Rating AAA(EXP)sf
A-X-9 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-1A LT AAsf New Rating AA(EXP)sf
B-2 LT Asf New Rating A(EXP)sf
B-2A LT Asf New Rating A(EXP)sf
B-3 LT BBB+sf New Rating BBB+(EXP)sf
B-4 LT BB+sf New Rating BB+(EXP)sf
B-5 LT Bsf New Rating B(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
B-X-1 LT AAsf New Rating AA(EXP)sf
B-X-2 LT Asf New Rating A(EXP)sf
TRANSACTION SUMMARY
The certificates are supported by 422 loans with a total balance of
approximately $348 million as of the cutoff date. The pool consists
of prime fixed-rate mortgages acquired by Woodward Capital
Management LLC (Woodward) from Quicken Loans, LLC (Quicken Loans).
Distributions of principal and interest and loss allocations are
based on a senior-subordinate, shifting-interest structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
422 loans, totaling $348 million, and seasoned approximately four
months in the aggregate (calculated as the difference between
origination date and first pay date). The borrowers have a strong
credit profile (771 FICO and 30% DTI) and low leverage (75% sLTV).
The pool consists of 97.6% of loans where the borrower maintains a
primary residence, while 2.4% is a second home. Additionally, 92%
of the loans were originated through a retail channel and 100% are
designated as Safe Harbor qualified mortgage.
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature for loans more than 120 days delinquent (a
stop-advance loan). Unpaid interest on stop-advance loans reduces
the amount of interest that is contractually due to bondholders in
reverse-sequential order. While this feature helps limit cash flow
leakage to subordinate bonds, it can result in interest reductions
to rated bonds in high-stress scenarios. A key difference with this
transaction, compared to other programs that treat stop-advance
loans similarly, is that liquidation proceeds are allocated to
interest before principal. As a result, Fitch included the full
interest carry in its loss projections and views the risk of
permanent interest reductions as lower than other programs with a
similar feature.
Low Operational Risk (Positive): Operational risk is well
controlled for in this transaction. Quicken Loans is assessed as an
'Above Average' originator and is contributing all of the loans to
the pool. The originator has a robust origination strategy and
maintains experienced senior management and staff, strong risk
management and corporate governance controls and a robust due
diligence process. Primary servicing functions will be performed by
Quicken Loans, which is rated 'RPS2'.
Credit Enhancement (CE) Floor (Positive): To mitigate tail risk,
which arises as the pool seasons and fewer loans are outstanding, a
subordination floor of 1.25% will be available for the senior bonds
and a subordinate floor of 1.05% of the original balance will be
maintained for the subordinate classes. The floor is sufficient to
protect against the five largest loans defaulting at Fitch's
'AAAsf' average loss severity of 43%.
Updated Economic Risk Factor (Positive): Consistent with the
Additional Scenario Analysis section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying an additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to its macroeconomic baseline scenario or if
actual performance data indicate the current assumptions require
reconsideration. In response to revisions to Fitch's macroeconomic
baseline scenario, observed actual performance data, and the
unexpected development in the health crisis arising from the
advancement and availability of coronavirus vaccines, Fitch
reconsidered the application of the coronavirus-related Economic
Risk Factor (ERF) floors of 2.0 and used ERF floors of 1.5 and 1.0
for the 'BBsf' and 'Bsf' rating stresses, respectively.
Fitch's "Global Economic Outlook - March 2021" and related baseline
economic scenario forecasts have been revised to 6.2% U.S. GDP
growth for 2021 and 3.3% for 2022 following the negative 3.5% GDP
rate in 2020. Additionally, Fitch's U.S. unemployment forecasts for
2021 and 2022 are 5.8% and 4.7%, respectively, down from 8.1% in
2020. These revised forecasts support Fitch reverting to the 1.5
and 1.0 ERF floors described in its "U.S. RMBS Loan Loss Model
Criteria."
ESG Impact (Positive): The transaction has an ESG Relevance Score
of '4[+]' for Exposure to Governance as a result of the strong
counterparties and well controlled operational considerations and
is relevant to the ratings in conjunction with other factors.
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
Factor that could, individually or collectively, lead to a negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 41.7% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factor that could, individually or collectively, lead to a positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Recovco. The third-party due diligence described in
Form 15E focused on a credit, compliance and property valuation
review. Fitch considered this information in its analysis and, as a
result, Fitch made the following adjustment(s) to its analysis: a
5% default reduction at the loan level. This adjustment resulted in
a 23bps reduction to the 'AAAsf' expected loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on 100% of the pool. The third-party due
diligence was consistent with Fitch's "U.S. RMBS Rating Criteria."
Recovco engaged to perform the review. Loans reviewed under this
engagement were given compliance, credit and valuation grades and
assigned initial grades for each subcategory. Minimal exceptions
and waivers were noted in the due diligence reports. Refer to the
Third-Party Due Diligence section of the presale report for further
details.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5-designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others, to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
RCKT Mortgage Trust 2021-2 has an ESG Relevance Score of '4[+]' for
Transaction Parties & Operational Risk due to the strong
counterparties and well controlled operational considerations,
which has a positive impact on the credit profile, and is relevant
to the rating[s] in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
RCKT MORTGAGE 2021-2: Moody's Assigns B3 Rating to Cl. B-5 Certs
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 49
classes of residential mortgage-backed securities issued by RCKT
Mortgage Trust 2021-2 (RCKT 2021-2). The ratings range from Aaa
(sf) to B3 (sf).
RCKT 2021-2 is a securitization of prime jumbo mortgage loans
originated and serviced by Quicken Loans, LLC (Rocket Mortgage,
rated Ba1 with Positive outlook). The transaction is backed by 422
first-lien, fully amortizing, 30-year fixed-rate qualified mortgage
(QM) loans, with an aggregate unpaid principal balance (UPB) of
$347,947,254. The average stated principal balance is $824,520.
The transaction will be sponsored by Woodward Capital Management
LLC, a wholly owned subsidiary of RKT Holdings, LLC (RKT Holdings).
Rocket Companies, Inc. (NYSE: RKT), is the sole managing member and
an owner of equity interests in RKT Holdings. This will be the
second issuance from RCKT Mortgage Trust in 2021 and the fourth
transaction for which Quicken Loans, LLC (wholly owned subsidiary
of RKT Holdings) is the sole originator and servicer. There is no
master servicer in this transaction. Citibank, N.A. (Citibank,
rated Aa3) will be the securities administrator and Wilmington
Savings Fund Society, FSB will be the trustee.
Transaction credit strengths include the high credit quality of the
collateral pool, the strong third-party review (TPR) results for
credit and compliance, and the prescriptive and unambiguous
representations & warranties (R&W) framework. Transaction credit
weaknesses include weaker property valuation review and having no
master servicer to oversee the primary servicer, unlike typical
prime jumbo transactions Moody's have rated.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. Moody's also compared the
collateral pool to other prime jumbo securitizations and adjusted
Moody's expected losses based on qualitative attributes, including
the financial strength of the R&W provider and TPR results.
RCKT 2021-2 has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and
a subordinate floor. Moody's coded the cash flow to each of the
certificate classes using Moody's proprietary cash flow tool.
The complete rating actions are as follows:
Issuer: RCKT Mortgage Trust 2021-2
Cl. A-1, Assigned Aaa (sf)
Cl. A-2, Assigned Aaa (sf)
Cl. A-3, Assigned Aaa (sf)
Cl. A-4, Assigned Aaa (sf)
Cl. A-5, Assigned Aaa (sf)
Cl. A-6, Assigned Aaa (sf)
Cl. A-7, Assigned Aaa (sf)
Cl. A-8, Assigned Aaa (sf)
Cl. A-9, Assigned Aaa (sf)
Cl. A-10, Assigned Aaa (sf)
Cl. A-11, Assigned Aaa (sf)
Cl. A-12, Assigned Aaa (sf)
Cl. A-13, Assigned Aaa (sf)
Cl. A-14, Assigned Aaa (sf)
Cl. A-15, Assigned Aaa (sf)
Cl. A-16, Assigned Aaa (sf)
Cl. A-17, Assigned Aaa (sf)
Cl. A-18, Assigned Aaa (sf)
Cl. A-19, Assigned Aaa (sf)
Cl. A-20, Assigned Aaa (sf)
Cl. A-21, Assigned Aaa (sf)
Cl. A-22, Assigned Aaa (sf)
Cl. A-23, Assigned Aaa (sf)
Cl. A-24, Assigned Aaa (sf)
Cl. A-X-1*, Assigned Aaa (sf)
Cl. A-X-1A*, Assigned Aaa (sf)
Cl. A-X-1B*, Assigned Aaa (sf)
Cl. A-X-2*, Assigned Aaa (sf)
Cl. A-X-3*, Assigned Aaa (sf)
Cl. A-X-4*, Assigned Aaa (sf)
Cl. A-X-5*, Assigned Aaa (sf)
Cl. A-X-6*, Assigned Aaa (sf)
Cl. A-X-7*, Assigned Aaa (sf)
Cl. A-X-8*, Assigned Aaa (sf)
Cl. A-X-9*, Assigned Aaa (sf)
Cl. A-X-10*, Assigned Aaa (sf)
Cl. A-X-11*, Assigned Aaa (sf)
Cl. A-X-12*, Assigned Aaa (sf)
Cl. A-X-13*, Assigned Aaa (sf)
Cl. A-X-14*, Assigned Aaa (sf)
Cl. B-1, Assigned Aa3 (sf)
Cl. B-X-1*, Assigned Aa3 (sf)
Cl. B-1A, Assigned Aa3 (sf)
Cl. B-2, Assigned A3 (sf)
Cl. B-X-2*, Assigned A3 (sf)
Cl. B-2A, Assigned A3 (sf)
Cl. B-3, Assigned Baa3 (sf)
Cl. B-4, Assigned Ba3 (sf)
Cl. B-5, Assigned B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario is 0.31%
at the mean (0.17% at the median) and reaches 2.85% at a stress
level consistent with Moody's Aaa ratings.
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of residential mortgage loans from a gradual and
unbalanced recovery in US economic activity.
Moody's increased its model-derived median expected losses by 10%
(6.58% for the mean) and Moody's Aaa loss by 2.5% to reflect the
likely performance deterioration resulting from the slowdown in US
economic activity due to the coronavirus outbreak. These
adjustments are lower than the 15% median expected loss and 5% Aaa
loss adjustments Moody's made on pools from deals issued after the
onset of the pandemic until February 2021. Moody's reduced
adjustments reflect the fact that the loan pool in this deal does
not contain any loans to borrowers who are not currently making
payments. For newly originated mortgage loans, post-COVID
underwriting takes into account the impact of the pandemic on a
borrower's ability to repay the mortgage. For seasoned mortgage
loans, as time passes, the likelihood that borrowers who have
continued to make payments throughout the pandemic will now become
non-cash flowing due to COVID-19 continues to decline.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the TPR and the R&W framework of the
transaction.
Collateral Description
RCKT 2021-2 is a securitization of 422 first lien prime jumbo
mortgage loans with an unpaid principal balance of $347,947,254.
100% of the mortgage loans in the pool are underwritten to Quicken
Loans' prime jumbo guidelines. The average stated principal balance
is $824,520 and the weighted average (WA) current mortgage rate is
2.8%. The loans in this transaction have strong borrower
characteristics with a weighted average primary borrower FICO score
of 776 and a weighted-average original loan-to-value ratio (LTV) of
67.4%. The WA original debt-to-income (DTI) ratio is 29.8%. The
average borrower total monthly income is $27,323 with an average
$92,840 of liquid cash reserves.
Approximately 17.6% of the mortgages are backed by properties in
California. The next largest states by geographic concentration in
the pool are Florida (11.2% by UPB), Texas (6.9% by UPB) and
Washington (6.0% by UPB). All other states each represent 5% or
less by UPB. Approximately 55.9% of the pool is backed by single
family residential properties and 40.1% is backed by PUDs.
Approximately 91.5% of the mortgages (by UPB) were originated
through the retail channel and the remaining 8.5% were originated
through the broker channel. Loans originated through different
origination channels often perform differently. Typically, loans
originated through a broker or correspondent channel do not perform
as well as loans originated through a retail channel, although
performance will vary by originator.
As of the cut-off date, none of the borrowers of the mortgage loans
are currently subject to a forbearance plan or are in the process
of being subject to a forbearance plan, including as a result of
COVID-19. In the event a borrower enters into a forbearance plan,
including as a result of COVID-19, after the cut-off date, such
mortgage loan will remain in the pool.
Origination Quality
Quicken Loans (aka Rocket Mortgage, rated Ba1, with Positive
outlook), founded in 1985 and headquartered in Detroit, Michigan,
is the largest overall US residential mortgage originator and the
largest retail originator. Quicken Loans' prime jumbo underwriting
(UW) guidelines are comparable with those of other prime jumbo
originators. The guidelines generally adhere to the UW guidelines
established by Fannie Mae and QM Appendix Q, except for loan
amount, certain UW ratios, and certain documentation requirements.
Moody's consider Quicken Loans to be an adequate originator of
prime jumbo loans following a detailed review of its UW guidelines,
quality control process, policies and procedures, technology
infrastructure, disaster recovery plan, and historical performance
relative to its peers. Therefore, Moody's did not apply a separate
adjustment for origination quality.
Servicing Arrangement
Moody's assess the overall servicing arrangement for this pool as
adequate, given the ability, scale and experience of Quicken Loans
as a servicer. However, compared to other prime jumbo transactions
which typically have a master servicer, servicer oversight for this
transaction is weaker. While TPR of Quicken Loans' servicing
operations, performance and regulatory compliance will be conducted
at least annually by an independent accounting firm, the
government-sponsored entities (GSEs), the Consumer Financial
Protection Bureau (CFPB) and state regulators, such oversight lacks
the depth and frequency that a master servicer would typically
provide.
However, Moody's did not adjust its expected losses for the weaker
servicing arrangement due to the following reasons: (1) Quicken
Loans' relative financial strength, scale, franchise value,
experience and demonstrated ability as a servicer, (2) Citibank as
the securities administrator will be responsible for making
advances of delinquent interest and principal if Quicken Loans is
unable to do so and for reconciling monthly remittances of cash by
Quicken Loans, (3) the R&W framework is strong and includes
triggers for delinquency and modification, which ensures that
poorly performing mortgage loans will be reviewed by a third-party,
and (4) the mortgage pool is of high credit quality and a TPR firm
has conducted due diligence on 100% of the mortgage loans in the
pool with satisfactory results.
Servicer compensation will be a monthly fee based on the
outstanding principal amount of the mortgage loans serviced, of a
per annum rate equal to 25 basis points (0.25%).
Third-Party Review
The transaction benefits from a TPR on 100% of the mortgage loans
for regulatory compliance, credit and property valuation. The due
diligence results confirm compliance with the originator's UW
guidelines for the vast majority of mortgage loans, no material
regulatory compliance issues, and no material property valuation
exceptions. The mortgage loans that had exceptions to the
originator's UW guidelines had significant compensating factors
that were documented. However, weaknesses exist in the property
valuation review, where 212 of the non-conforming mortgage loans
originated under Quicken Loans' prime jumbo guidelines had a
property valuation review only consisting of a Fannie Mae's
Collateral Underwriter and no other third party valuation product
such as a Collateral Desktop Analysis (CDA) and field review or
second full appraisal. As a result, Moody's applied an adjustment
to the collateral loss for such mortgage loans since the sample
size of mortgage loans in the pool that were reviewed using a
third-party valuation product such as a CDA was insufficient.
Representations & Warranties
Moody's assessed RCKT 2021-2's R&W framework for this transaction
as adequate, consistent with that of other prime jumbo transactions
for which an independent reviewer is named at closing, the breach
review process is thorough, transparent and objective, and the
costs and manner of review are clearly outlined at issuance.
However, Moody's applied an adjustment to Moody's losses to account
for the risk that Quicken Loans may be unable to repurchase
defective mortgage loans in a stressed economic environment, given
that it is a non-bank entity with a monoline business (mortgage
origination and servicing) that is highly correlated with the
economy. However, Moody's tempered this adjustment by taking into
account Quicken Loans' relative financial strength and the strong
TPR results which suggest a lower probability that poorly
performing mortgage loans will be found defective following review
by the independent reviewer.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor and a subordination lock-out amount of
1.25% and 1.05% of the cut-off date pool balance, respectively. The
floors are consistent with the credit neutral floors for the
assigned ratings according to Moody's methodology.
Transaction Structure
The securitization has a shifting interest structure that benefits
from a senior floor and a subordinate floor. Funds collected,
including principal, are first used to make interest payments and
then principal payments to the senior bonds, and then interest and
principal payments to each subordinate bond. As in all transactions
with shifting interest structures, the senior bonds benefit from a
cash flow waterfall that allocates all unscheduled principal
collections to the senior bond for a specified period and
increasing amounts of unscheduled principal collections to the
senior bond for a specified period and increasing amounts of
unscheduled principal collections to the subordinate bonds
thereafter, but only if loan performance satisfies delinquency and
loss tests. Realized losses are allocated reverse sequentially
among the subordinate and senior support certificates and on a
pro-rata basis among the super senior certificates.
Furthermore, similar to RCKT 2021-1, this transaction contains a
structural deal mechanism in which the servicer and the securities
administrator will not advance principal and interest (P&I) to
mortgage loans that are 120 days or more delinquent. Although this
feature lowers the risk of high advances that may negatively affect
the recoveries on liquidated loans, the reduction in interest
distribution amount is credit negative to the subordinate
certificates, because interest shortfalls resulting from
delinquencies from "Stop Advance Mortgage Loans" (SAML) is
allocated to the subordinate certificates (in reverse order of
distribution priority), then to the senior support certificates and
finally to the super-senior certificates. Once a SAML is
liquidated, the net recovery from that loan's liquidation is
included in available funds and thus follows the transaction's
priority of payment. In Moody's analysis, Moody's have considered
the additional interest shortfall that the certificates may incur
due to the transaction's stop-advance feature.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in April 2020.
SEQUOIA MORTGAGE 2021-5: Fitch Assigns BB- Rating on B-4 Certs
--------------------------------------------------------------
Fitch Ratings rates the residential mortgage-backed certificates
issued by Sequoia Mortgage Trust 2021-5 (SEMT 2021-5).
DEBT RATING PRIOR
---- ------ -----
Sequoia Mortgage Trust 2021-5
A-1 LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-25 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-IO1 LT AAAsf New Rating AAA(EXP)sf
A-IO10 LT AAAsf New Rating AAA(EXP)sf
A-IO11 LT AAAsf New Rating AAA(EXP)sf
A-IO12 LT AAAsf New Rating AAA(EXP)sf
A-IO13 LT AAAsf New Rating AAA(EXP)sf
A-IO14 LT AAAsf New Rating AAA(EXP)sf
A-IO15 LT AAAsf New Rating AAA(EXP)sf
A-IO16 LT AAAsf New Rating AAA(EXP)sf
A-IO17 LT AAAsf New Rating AAA(EXP)sf
A-IO18 LT AAAsf New Rating AAA(EXP)sf
A-IO19 LT AAAsf New Rating AAA(EXP)sf
A-IO2 LT AAAsf New Rating AAA(EXP)sf
A-IO20 LT AAAsf New Rating AAA(EXP)sf
A-IO21 LT AAAsf New Rating AAA(EXP)sf
A-IO22 LT AAAsf New Rating AAA(EXP)sf
A-IO23 LT AAAsf New Rating AAA(EXP)sf
A-IO24 LT AAAsf New Rating AAA(EXP)sf
A-IO25 LT AAAsf New Rating AAA(EXP)sf
A-IO26 LT AAAsf New Rating AAA(EXP)sf
A-IO3 LT AAAsf New Rating AAA(EXP)sf
A-IO4 LT AAAsf New Rating AAA(EXP)sf
A-IO5 LT AAAsf New Rating AAA(EXP)sf
A-IO6 LT AAAsf New Rating AAA(EXP)sf
A-IO7 LT AAAsf New Rating AAA(EXP)sf
A-IO8 LT AAAsf New Rating AAA(EXP)sf
A-IO9 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-2 LT A-sf New Rating A-(EXP)sf
B-3 LT BBB-sf New Rating BBB-(EXP)sf
B-4 LT BB-sf New Rating BB-(EXP)sf
B-5 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The certificates are supported by 522 loans with a total balance of
approximately $450.86 million, as of the cut-off date. The pool
consists of prime fixed-rate mortgages (FRMs) acquired by Redwood
Residential Acquisition Corp. from various mortgage originators.
Distributions of principal and interest (P&I) and loss allocations
are based on a senior-subordinate, shifting-interest structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
522 full documentation loans, totaling $450.86 million and seasoned
approximately 2.9 months in aggregate (difference between
origination date and cut-off date). The borrowers have a strong
credit profile (772 model FICO, 29.9% debt to income ratio [DTI])
and moderate leverage (74.5% sustainable loan to value ratio
[sLTV]). Of the pool, 95.6% consist of loans for primary
residences, while 4.4% are for second homes. Additionally, 90.3% of
the loans were originated through a retail channel, and 100% are
designated as a qualified mortgage (QM) loan.
Shifting-Interest Structure (Negative): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature most commonly used by Redwood's program for
loans more than 120 days delinquent (a stop-advance loan). Unpaid
interest on stop-advance loans reduces the amount of interest that
is contractually due to bondholders in reverse-sequential order.
While this feature helps limit cash flow leakage to subordinate
bonds, it can result in interest reductions to rated bonds in high
stress scenarios.
120-Day Stop Advance (Mixed): The deal is structured to four months
of servicer advances for delinquent P&I. The limited advancing
reduces loss severities as a lower amount is repaid to the servicer
when a loan liquidates.
CE Floor (Positive): To mitigate tail risk, which arises as the
pool seasons and fewer loans are outstanding, a subordination floor
of 0.75% of the original balance will be maintained for the
certificates.
Updated Economic Risk Factor (Positive): Consistent with the
"Additional Scenario Analysis" section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to its macroeconomic baseline scenario or if
actual performance data indicate the current assumptions require
reconsideration. In response to revisions made to Fitch's
macroeconomic baseline scenario, observed actual performance data,
and the unexpected development in the health crisis arising from
the advancement and availability of coronavirus vaccines, Fitch
reconsidered the application of the coronavirus-related ERF floors
of 2.0 and used ERF floors of 1.5 and 1.0 for the 'BBsf' and 'Bsf'
rating stresses, respectively.
Fitch's March 2021 "Global Economic Outlook" and related base-line
economic scenario forecasts have been revised to 6.2% U.S. GDP
growth for 2021 and 3.3% for 2022, following the negative 3.5% GDP
rate in 2020. Additionally, Fitch's U.S. unemployment forecasts for
2021 and 2022 are 5.8% and 4.7%, respectively, down from 8.1% in
2020. These revised forecasts support Fitch reverting to the 1.5
and 1.0 ERF floors described in its "U.S. RMBS Loan Loss Model
Criteria."
ESG Relevance Score of '4[+]' (Positive): The transaction has an
ESG Relevance Score of '4[+]' for Exposure to Governance as a
result of the strong counterparties and well-controlled operational
considerations, and is relevant to the ratings in conjunction with
other factors. The presence of Select Portfolio Servicing as a
party to the transaction resulted in a reduction of the 'AAAsf'
loss severity by 5pts.
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
Factor that could, individually or collectively, lead to a negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 41.3% at 'AAA'. The analysis
indicates some potential rating migration with higher MVDs for
all rated classes, compared with the model projection.
Specifically, a 10% additional decline in home prices would
lower all rated classes by one full category.
Factor that could, individually or collectively, lead to a positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Clayton and EdgeMac. The third-party due diligence
described in Form 15E focused on credit, compliance and property
valuations. Fitch considered this information in its analysis and,
as a result, Fitch made the following adjustment to its analysis: a
5% reduction to the loan's probability of default. This adjustment
resulted in a less than 25bps reduction to the 'AAAsf' expected
loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 80% of the pool. The
third-party due diligence was consistent with Fitch's "U.S. RMBS
Rating Criteria." Clayton and EdgeMac, were engaged to perform the
review. Loans reviewed under this engagement were given compliance,
credit and valuation grades and assigned initial grades for each
subcategory. Minimal exceptions and waivers were noted in the due
diligence reports. Refer to the Third-Party Due Diligence section
of the presale report for further details.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5-designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others, to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
Sequoia Mortgage Trust 2021-5 has an ESG Relevance Score of '4[+]'
for Transaction Parties & Operational Risk due to the strong
counterparties and well controlled operational considerations.,
which has a positive impact on the credit profile, and is relevant
to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SLG OFFICE 2021-OVA: DBRS Finalizes B Rating on Class G Certs
-------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings to the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2021-OVA issued by SLG Office Trust 2021-OVA (SLG 2021-OVA):
-- Class A at AAA (sf)
-- Class X at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (sf)
-- Class HRR at B (low) (sf)
All trends are Stable.
The SLG Office Trust 2021-OVA single-asset/single-borrower
transaction is collateralized by the borrower's fee-simple interest
in One Vanderbilt, a 1,648,713-square foot (sf) Class A office high
rise located directly adjacent to Grand Central Terminal in Midtown
Manhattan, New York. The collateral was developed by the
transaction sponsor, SL Green Realty Corp. (SL Green). In addition
to being exceptionally well located, the collateral exhibits asset
quality that is relatively unmatched, even among New York's
existing supply of trophy office properties. The subject's general
composition includes more than 1.5 million sf of luxury office
space, a roughly 67,000-sf observation deck called the Summit,
nearly 32,000 sf of high-end retail and restaurant space (inclusive
of the Summit's reception area), and nearly 30,000 sf of tenant
amenity space.
Despite having not yet finalized construction, One Vanderbilt was
89.1% leased as of loan closing with a weighted-average (WA)
remaining lease term of 17.0 years, which DBRS Morningstar believes
should largely shield the property from any short- or medium-term
dislocations in the Midtown Manhattan office market resulting from
the ongoing Coronavirus Disease (COVID-19) pandemic. The property
benefits from a large proportion of long-term, institutional-grade
tenancy and nearly zero lease rollover through the scheduled loan
maturity. The collateral's clearly superior asset quality and
market location are projected to fuel a new ceiling for Midtown
Manhattan office rents, a trend clearly supported by the
collateral's active lease-up during the height of the ongoing
coronavirus pandemic. Overall, DBRS Morningstar believes that the
collateral is well positioned to remain an attractive option for
the market's top office tenants, or at least those in a position to
execute leases before the collateral reaches 100.0% occupancy.
As of loan closing, approximately 34.8% of the collateral's total
net rentable area (NRA) was leased to tenants with investment-grade
ratings and 35.9% of the collateral's in-place base rent was
derived from investment-grade tenants that qualified for long-term
credit tenant (LTCT) treatment as part of the DBRS Morningstar Net
Cash Flow analysis. An additional 26.3% of the collateral's
in-place base rent reported at closing was derived from global law
firms with reported 2020 gross revenues placing them in the top 40
highest grossing law firms in the world. In addition to the
institutional-grade tenancy, the collateral benefits from nearly
zero lease rollover during the 10-year lease term with only 5.2% of
total NRA (representing 5.0% of the DBRS Morningstar gross rent)
scheduled to roll prior to loan maturity. As of loan closing the
collateral was 89.1% leased with a WA remaining lease term of 17.0
years, which results in a stable, long-term cash flow stream with
contractual rent increases built into many of the leases.
The transaction benefits from strong, experienced, and investment
grade-rated sponsorship in SL Green, which is one of Manhattan's
largest office landlords. As of March 31, 2021, SL Green reported
interests in 84 buildings totaling 37.8 million sf, including
ownership interests 28.3 million sf of Manhattan buildings and 8.7
million sf securing debt and preferred equity investments. The
borrower (One Vanderbilt Owner LLC) is approximately 71.0%
indirectly owned and controlled by the SL Green Realty Corp., with
the remainder being held by National Pension Service of Korea
(27.6%) and by Hines Interests Limited Partnership (1.4%). The
National Pension Service of Korea is one of the largest pension
funds in the world with approximately $771.0 billion in assets as
of February 2021. Hines Interests Limited Partnerships (Hines) is
one of the largest privately held real estate investors, managers,
and developers in the world. With reported management interests in
576 properties totaling 246.0 million sf.
The DBRS Morningstar LTV ratio for the $3.0 billion of total debt
is relatively substantial at 100.8%. To account for the high
leverage, DBRS Morningstar programmatically reduced its LTV
benchmark targets for the transaction by 1.5% across the capital
structure. The high leverage point, combined with the lack of
scheduled amortization, pose potentially elevated refinance risk at
loan maturity. The loan documents do not permit additional debt or
future additional debt as part of this transaction with customary
exceptions for trade payables and other property expenses. The
Borrower Sponsor for this transaction is partially using loan
proceeds to repatriate more than $1.0 billion of cash equity for
distribution. DBRS Morningstar views cash-out refinancing
transactions as less favorable than acquisition financings because
sponsors typically have less incentive to support a property
through times of economic stress if less of their own cash equity
is at risk.
As part of Carlyle Investment Management's lease agreement at One
Vanderbilt, SL Green agreed to take over Carlyle's lease obligation
at 520 Madison Avene. Carlyle's lease at 520 Madison Avenue extends
through May 2031 with approximately $213.3 million of outstanding
rent obligations outstanding as of loan closing. Carlyle's space at
520 Madison is subleased to three tenants, though not all of the
subleases extend through the remainder of Carlyle's lease term, nor
do the subleased rents cover the entirety of Carlyle's monthly rent
obligations. To mitigate shortfalls in rent owed at 520 Madison
Avenue, the loan included reserves at closing sufficient to cover
the remainder of Carlyle's outstanding rent obligations, net of
projected sublease income. DBRS Morningstar also applied an
additional $8.0 million value penalty to account for what DBRS
Morningstar perceived to be shortfalls in the reserved rent
amounts. Similar to the execution of Carlyle Investment
Management's lease agreement, the sponsor has taken over existing
leases of incoming tenants at several alternative properties
including 340 Madison Avenue, 330 Madison Avenue, the Grace
Building, 1140 Avenue of the Americas, 375 Park Avenue, and 510
Madison Avenue. The total obligations across these properties
(approximately $32.1 million) have been reserved for upfront as
part of this transaction.
While One Vanderbilt currently stands as the pinnacle for premier
office space in Midtown Manhattan (and the greater New York City),
competitive developers RXR Realty and TF Cornerstone have announced
plans to redevelop the Grand Hyatt located on the adjacent side of
Grand Central Terminal at 175 Park Avenue. The proposed
redevelopment would stand 83 stories (approximately 1,600 feet)
tall, making it the tallest building in Midtown and potentially
overshadowing One Vanderbilt. Early plans of Project Commodore
indicate the redevelopment could add 2.1 million sf of luxury
office space to the Midtown Market (within roughly a block of the
collateral), in addition to approximately 10,000 sf of ground-floor
and cellar retail space. Project Commodore is not anticipated to be
completed until 2030 at the earliest, and its delivery will likely
further solidify the collateral's location as Manhattan's premier
office market. Additionally, Project Commodore's overall
investments to the surrounding infrastructure should provide a
long-term benefit to One Vanderbilt.
Notes: All figures are in U.S. dollars unless otherwise noted.
SOUND POINT XXX: Moody's Assigns Ba3 Rating to $20MM Class E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued by Sound Point CLO XXX, Ltd. (the "Issuer" or "Sound
Point XXX").
Moody's rating action is as follows:
US$300,000,000 Class A-1 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$20,000,000 Class A-2 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$42,000,000 Class B-1 Senior Secured Floating Rate Notes due
2034, Assigned Aa2 (sf)
US$18,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2034,
Assigned Aa2 (sf)
US$30,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$30,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$20,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes listed are referred to, collectively, as the "Rated
Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Sound Point XXX is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
senior secured loans and eligible investments, and up to 10% of the
portfolio may consist of second lien loans, senior unsecured loans
and bonds. The portfolio is approximately 87% ramped as of the
closing date.
Sound Point Capital Management, LP (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 80
Weighted Average Rating Factor (WARF): 2849
Weighted Average Spread (WAS): 3.45%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.25%
Weighted Average Life (WAL): 9.08 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
STARWOOD MORTGAGE 2021-3: DBRS Gives Prov. B Rating on B-2 Certs
----------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the Mortgage
Pass-Through Certificates, Series 2021-3 to be issued by Starwood
Mortgage Residential Trust 2021-3 (STAR 2021-3):
-- $239.2 million Class A-1 at AAA (sf)
-- $24.6 million Class A-2 at AA (low) (sf)
-- $18.1 million Class A-3 at A (sf)
-- $15.1 million Class M-1 at BBB (sf)
-- $10.2 million Class B-1 at BB (sf)
-- $6.0 million Class B-2 at B (sf)
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The AAA (sf) rating on the Class A-1 Notes reflects 24.60% of
credit enhancement provided by subordinate notes. The AA (low)
(sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 16.85%,
11.15%, 6.40%, 3.20%, and 1.30% of credit enhancement,
respectively.
This securitization consists of a portfolio of fixed- and
adjustable-rate, expanded prime and nonprime first-lien residential
mortgages funded by the issuance of the Certificates. The
Certificates are backed by 338 mortgage loans with a total
principal balance of $317,239,423 as of the Cut-Off Date (June 1,
2021).
The originators for the mortgage pool are Luxury Mortgage Corp.
(Luxury Mortgage; 68.5%), HomeBridge Financial Services, Inc.
(Homebridge; 21.9%), and other originators that each comprise less
than 10% of the mortgage pool. The Servicer of the loans is Select
Portfolio Servicing, Inc. DBRS Morningstar conducted a review of
Starwood's residential mortgage platform and believes the company
is an acceptable mortgage loan aggregator. However, DBRS
Morningstar has not performed an operational risk review on Luxury
Mortgage and Homebridge.
The proposed pool is about four months seasoned on a weighted
average basis, although seasoning may span from one up to 61
months. All loans in the pool are current as of the Cut-Off Date.
Approximately 5.9% of the pool have missed at least one payment in
the past 24 months. The rest of the loans (94.1% of the pool) have
been current over the same period.
All acquired mortgage loans are underwritten and funded by the
originators on a delegated basis pursuant to either Starwood
proprietary guidelines or approved originator underwriting
guidelines.
Although the mortgage loans were originated to satisfy the Consumer
Financial Protection Bureau's (CFPB) Qualified Mortgage (QM) and
Ability-to-Repay (ATR) rules where applicable, they were made to
borrowers who generally do not qualify for agency, government, or
private-label nonagency prime jumbo products for various reasons.
In accordance with the QM/ATR rules, approximately 72.7% of the
loans are designated as non-QM.
Approximately 27.2% of the loans are made to investors for business
purposes and, hence, are not subject to the QM/ATR rules. The
mortgage loans were underwritten to program guidelines for
business-purpose loans that are designed to rely on the
property-level cash flows for approximately 16.9% of the loans, and
mortgagor's credit profile and debt-to-income ratio, property
value, and the available assets, where applicable, for
approximately 9.8% of the loans. Since the loans were made to
investors for business purposes, they are exempt from the CFPB ATR
rules and TILA/RESPA Integrated Disclosure rule.
For investor loans originated to investors under debt service
coverage ratio (DSCR) programs (16.9% of the pool), lenders use
property cash flow or the DSCR to qualify borrowers for income. The
DSCR is typically calculated as market rental value (validated by
an appraisal report) divided by the principal, interest, taxes,
insurance, and association dues.
For this transaction, the Servicer will fund advances of delinquent
principal and interest until loans become 180 days delinquent or
are otherwise deemed unrecoverable. Additionally, the Servicer is
obligated to make advances with respect to taxes, insurance
premiums, and reasonable costs incurred in the course of servicing
and disposing properties.
The Sponsor, directly or indirectly through a majority-owned
affiliate, is expected to retain an eligible horizontal residual
interest consisting of a portion of the Class B-3 Certificates and
all of the Class XS Certificates, representing at least 5% of the
Certificates, to satisfy the credit risk-retention requirements
under Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
On or after the earlier of (1) the distribution date in June 2024
or (2) the date when the aggregate stated principal balance of the
mortgage loans is reduced to 30% of the Cut-Off Date balance,
Starwood Non-Agency Securities Holdings, LLC as Optional Redemption
Holder may redeem all outstanding Certificates (Optional
Redemption) at a price equal to the greater of (a) unpaid balances
of the mortgage loans plus accrued, unpaid interest, and the fair
market value of all real estate-owned (REO) properties as well as
deferred amounts (excluding the forbearance Amounts as of the
Cut-Off Date) and (b) the sum of the remaining aggregate balance of
the Certificates plus accrued and unpaid interest, and any fees,
expenses, and indemnity payments due and unpaid to the transaction
parties, including any unreimbursed servicing advances (Optional
Redemption Price). The Optional Redemption Holder is an entity
designated by the Depositor and a 50% affiliate of the Depositor.
Additionally, if on any date on which the unpaid mortgage loan
balance and the value of REO properties has declined to less than
8% of the initial mortgage loan balance as of the Cut-Off Date, the
Master Servicer will also have the right to purchase at the
Optional Clean-Up Call Price all of the mortgages, REO properties,
and any other properties from the Issuer. However, following
receipt of notice of the Master Servicer's intent to exercise the
Optional Clean-Up Call, the Servicing Administrator will have 30
days to exercise an Optional Redemption.
The Seller (SMRF TRS LLC) will have the option, but not the
obligation, to repurchase any mortgage loan that becomes 90 or more
days delinquent under the Mortgage Bankers Association (MBA) Method
(or in the case of any mortgage loan that has been subject to a
forbearance plan related to the impact of the Coronavirus Disease
(COVID-19) pandemic, on any date from and after the date on which
such loan becomes more than 90 days delinquent under the MBA Method
from the end of the forbearance period) at the repurchase price
(par plus interest), provided that such repurchases in aggregate do
not exceed 10% of the total principal balance as of the Cut-Off
Date (excluding any loan repurchased by the Seller related to a
breach of a representation and warranty).
The transaction's cash flow structure is similar to that of other
non-QM securitizations. The transaction employs a sequential-pay
cash flow structure with a pro rata principal distribution among
the senior tranches subject to certain performance triggers related
to cumulative losses or delinquencies exceeding a specified
threshold (a Trigger Event). Principal proceeds can be used to
cover interest shortfalls on the Class A-1 and Class A-2
Certificates (IIPP) before being applied sequentially to amortize
the balances of the senior and subordinated certificates. For the
Class A-3 Notes (only after a Credit Event) and for the mezzanine
and subordinate classes of notes (both before and after a Credit
Event), principal proceeds can be used to cover interest shortfalls
as the more senior Certificates are paid in full. Also, the excess
spread can be used to cover realized losses first before being
allocated to unpaid Cap Carryover Amounts due to Class A-1 down to
Class B-2.
CORONAVIRUS IMPACT
The coronavirus pandemic and the resulting isolation measures have
caused an immediate economic contraction, leading to sharp
increases in unemployment rates and income reductions for many
consumers. DBRS Morningstar saw increases in delinquencies for many
residential mortgage-backed securities (RMBS) asset classes,
shortly after the onset of the pandemic.
Such mortgage delinquencies were mostly in the form of forbearance,
which are generally short-term payment reliefs that may perform
very differently from traditional delinquencies. At the onset of
the pandemic, the option to forebear mortgage payments was so
widely available, driving forbearance to a very high level. When
the dust settled, coronavirus-induced forbearance in 2020 performed
better than expected, thanks to government aid, low loan-to-value
ratios, and good underwriting in the mortgage market in general.
Across nearly all RMBS asset classes, delinquencies have been
gradually trending down in recent months as the forbearance period
comes to an end for many borrowers.
In connection with the economic stress assumed under its moderate
scenario, DBRS Morningstar may assume higher loss expectations for
pools with loans on forbearance plans.
Notes: All figures are in U.S. dollars unless otherwise noted.
SYMPHONY CLO XVIII: Moody's Rates $2MM Class F-R Notes 'B3'
-----------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
CLO refinancing notes and forty classes of MASCOT notes issued by
Symphony CLO XVIII, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$3,250,000 Class X Amortizing Senior Floating Rate Notes due 2033
(the "Class X Notes"), Assigned Aaa (sf)
US$279,000,000 Class A-1-RR Senior Floating Rate Notes due 2033
(the "Class A-1-RR Notes"), Assigned Aaa (sf)
Up to US$279,000,000 Class A-1-1 Floating Rate MASCOT Notes due
2033 (the "Class A-1-1 Notes"), Assigned Aaa (sf)
Up to US$279,000,000 Class A-1-1X Interest Only Notes* due 2033
(the "Class A-1-1X Notes"), Assigned Aaa (sf)
Up to US$279,000,000 Class A-1-2 Floating Rate MASCOT Notes due
2033 (the "Class A-1-2 Notes"), Assigned Aaa (sf)
Up to US$279,000,000 Class A-1-2X Interest Only Notes* due 2033
(the "Class A-1-2X Notes"), Assigned Aaa (sf)
Up to US$279,000,000 Class A-1-3 Floating Rate MASCOT Notes due
2033 (the "Class A-1-3 Notes"), Assigned Aaa (sf)
Up to US$279,000,000 Class A-1-3X Interest Only Notes* due 2033
(the "Class A-1-3X Notes"), Assigned Aaa (sf)
Up to US$279,000,000 Class A-1-4 Floating Rate MASCOT Notes due
2033 (the "Class A-1-4 Notes"), Assigned Aaa (sf)
Up to US$279,000,000 Class A-1-4X Interest Only Notes* due 2033
(the "Class A-1-4X Notes"), Assigned Aaa (sf)
US$13,500,000 Class A-2-R Senior Floating Rate Notes due 2033 (the
"Class A-2-R Notes"), Assigned Aaa (sf)
Up to US$13,500,000 Class A-2-1 Floating Rate MASCOT Notes due 2033
(the "Class A-2-1 Notes"), Assigned Aaa (sf)
Up to US$13,500,000 Class A-2-1X Interest Only Notes* due 2033 (the
"Class A-2-1X Notes"), Assigned Aaa (sf)
Up to US$13,500,000 Class A-2-2 Floating Rate MASCOT Notes due 2033
(the "Class A-2-2 Notes"), Assigned Aaa (sf)
Up to US$13,500,000 Class A-2-2X Interest Only Notes* due 2033 (the
"Class A-2-2X Notes"), Assigned Aaa (sf)
Up to US$13,500,000 Class A-2-3 Floating Rate MASCOT Notes due 2033
(the "Class A-2-3 Notes"), Assigned Aaa (sf)
Up to US$13,500,000 Class A-2-3X Interest Only Notes* due 2033 (the
"Class A-2-3X Notes"), Assigned Aaa (sf)
Up to US$13,500,000 Class A-2-4 Floating Rate MASCOT Notes due 2033
(the "Class A-2-4 Notes"), Assigned Aaa (sf)
Up to US$13,500,000 Class A-2-4X Interest Only Notes* due 2033 (the
"Class A-2-4X Notes"), Assigned Aaa (sf)
US$45,000,000 Class B-R Senior Floating Rate Notes due 2033 (the
"Class B-R Notes"), Assigned Aa2 (sf)
Up to US$45,000,000 Class B-1 Floating Rate MASCOT Notes due 2033
(the "Class B-1 Notes"), Assigned Aa2 (sf)
Up to US$45,000,000 Class B-1X Interest Only Notes* due 2033 (the
"Class B-1X Notes"), Assigned Aa2 (sf)
Up to US$45,000,000 Class B-2 Floating Rate MASCOT Notes due 2033
(the "Class B-2 Notes"), Assigned Aa2 (sf)
Up to US$45,000,000 Class B-2X Interest Only Notes* due 2033 (the
"Class B-2X Notes"), Assigned Aa2 (sf)
Up to US$45,000,000 Class B-3 Floating Rate MASCOT Notes due 2033
(the "Class B-3 Notes"), Assigned Aa2 (sf)
Up to US$45,000,000 Class B-3X Interest Only Notes* due 2033 (the
"Class B-3X Notes"), Assigned Aa2 (sf)
Up to US$45,000,000 Class B-4 Floating Rate MASCOT Notes due 2033
(the "Class B-4 Notes"), Assigned Aa2 (sf)
Up to US$45,000,000 Class B-4X Interest Only Notes* due 2033 (the
"Class B-4X Notes"), Assigned Aa2 (sf)
US$22,500,000 Class C-R Deferrable Mezzanine Floating Rate Notes
due 2033 (the "Class C-R Notes"), Assigned A2 (sf)
Up to US$22,500,000 Class C-1 Floating Rate MASCOT Notes due 2033
(the "Class C-1 Notes"), Assigned A2 (sf)
Up to US$22,500,000 Class C-1X Interest Only Notes* due 2033 (the
"Class C-1X Notes"), Assigned A2 (sf)
Up to US$22,500,000 Class C-2 Floating Rate MASCOT Notes due 2033
(the "Class C-2 Notes"), Assigned A2 (sf)
Up to US$22,500,000 Class C-2X Interest Only Notes* due 2033 (the
"Class C-2X Notes"), Assigned A2 (sf)
Up to US$22,500,000 Class C-3 Floating Rate MASCOT Notes due 2033
(the "Class C-3 Notes"), Assigned A2 (sf)
Up to US$22,500,000 Class C-3X Interest Only Notes* due 2033 (the
"Class C-3X Notes"), Assigned A2 (sf)
Up to US$22,500,000 Class C-4 Floating Rate MASCOT Notes due 2033
(the "Class C-4 Notes"), Assigned A2 (sf)
Up to US$22,500,000 Class C-4X Interest Only Notes* due 2033 (the
"Class C-4X Notes"), Assigned A2 (sf)
US$30,375,000 Class D-R Deferrable Mezzanine Floating Rate Notes
due 2033 (the "Class D-R Notes"), Assigned Baa3 (sf)
Up to US$30,375,000 Class D-1 Floating Rate MASCOT Notes due 2033
(the "Class D-1 Notes"), Assigned Baa3 (sf)
Up to US$30,375,000 Class D-1X Interest Only Notes* due 2033 (the
"Class D-1X Notes"), Assigned Baa3 (sf)
Up to US$30,375,000 Class D-2 Floating Rate MASCOT Notes due 2033
(the "Class D-2 Notes"), Assigned Baa3 (sf)
Up to US$30,375,000 Class D-2X Interest Only Notes* due 2033 (the
"Class D-2X Notes"), Assigned Baa3 (sf)
Up to US$30,375,000 Class D-3 Floating Rate MASCOT Notes due 2033
(the "Class D-3 Notes"), Assigned Baa3 (sf)
Up to US$30,375,000 Class D-3X Interest Only Notes* due 2033 (the
"Class D-3X Notes"), Assigned Baa3 (sf)
Up to US$30,375,000 Class D-4 Floating Rate MASCOT Notes due 2033
(the "Class D-4 Notes"), Assigned Baa3 (sf)
Up to US$30,375,000 Class D-4X Interest Only Notes* due 2033 (the
"Class D-4X Notes"), Assigned Baa3 (sf)
US$22,500,000 Class E-R Deferrable Mezzanine Floating Rate Notes
due 2033 (the "Class E-R Notes"), Assigned Ba3 (sf)
US$2,000,000 Class F-R Deferrable Mezzanine Floating Rate Notes due
2033 (the "Class F-R Notes"), Assigned B3 (sf)
*Reflects Interest-Only Classes
The Class X Notes, the Class A-1RR Notes, the Class A-2R Notes, the
Class B-R Notes, the Class C-R Notes, the Class D-R Notes, the
Class E-R Notes, and the Class F-R Notes are referred to herein,
collectively, as the "Refinancing Notes."
The Class A-1-1 Notes, the Class A-1-1X Notes, the Class A-1-2
Notes, the Class A-1-2X Notes, the Class A-1-3 Notes, the Class
A-1-3X Notes, the Class A-1-4 Notes, the Class A-1-4X Notes, the
Class A-2-1 Notes, the Class A-2-1X Notes, the Class A-2-2 Notes,
the Class A-2-2X Notes, the Class A-2-3 Notes, the Class A-2-3X
Notes, the Class A-2-4 Notes, the Class A-2-4X Notes, the Class B-1
Notes, the Class B-1X Notes, the Class B-2 Notes, the Class B-2X
Notes, the Class B-3 Notes, the Class B-3X Notes, the Class B-4
Notes, the Class B-4X Notes, the Class C-1 Notes, the Class C-1X
Notes, the Class C-2 Notes, the Class C-2X Notes, the Class C-3
Notes, the Class C-3X Notes, the Class C-4 Notes, the Class C-4X
Notes, the Class D-1 Notes, the Class D-1X Notes, the Class D-2
Notes, the Class D-2X Notes, the Class D-3 Notes, the Class D-3X
Notes, the Class D-4 Notes, and the Class D-4X Notes are referred
to herein, collectively, as the "MASCOT Notes."
The Class A-1RR Notes, the Class A-2R Notes, the Class B-R Notes,
the Class C-R Notes, and the Class D-R Notes are exchangeable in
part or in full for one of various combinations specified in the
indenture consisting of (1) a corresponding MASCOT principal and
interest note (the "MASCOT P&I Notes") with the same principal
balance as the A-1RR Notes, the Class A-2R Notes, the Class B-R
Notes, the Class C-R Notes, and the Class D-R Notes surrendered,
but with a reduced interest rate and (2) interest only notes with a
notional balance equal to the principal balance of the MASCOT P&I
Notes received and with a fixed interest rate equal to the
reduction in the note interest rate of the related MASCOT P&I
Notes. The MASCOT Notes may be subsequently exchanged for the A-1RR
Notes, the Class A-2R Notes, the Class B-R Notes, the Class C-R
Notes, and the Class D-R Notes.
The MASCOT Notes combinations with respect to the Class A-1RR Notes
are the Class A-1-1 Notes and the Class A-1-1X Notes, the Class
A-1-2 Notes and the Class A-1-2X Notes, the Class A-1-3 Notes and
the Class A-1-3X Notes, and the Class A-1-4 Notes and the Class
A-1-4X Notes.
At closing, the Class A-1-1 Notes, the Class A-1-2 Notes, the Class
A-1-3 Notes, and the Class A-1-4 Notes have a principal balance of
zero. The aggregate outstanding amount of the Class A-1-1 Notes,
the Class A-1-2 Notes, the Class A-1-3 Notes, and the Class A-1-4
Notes will never exceed $279,000,000 less any principal repayments
on the Refinancing Notes.
The Class A-1-1X Notes, the Class A-1-2X Notes, the Class A-1-3X
Notes, and the Class A-1-4X Notes are interest only notes,
collectively, as "Class A-1-X Notes", have an aggregate notional
amount of zero on the closing date and will not be entitled to any
payments of principal.
The MASCOT Notes combinations with respect to the Class A-2R Notes
are the Class A-2-1 Notes and the Class A-2-1X Notes, the Class
A-2-2 Notes and the Class A-2-2X Notes, the Class A-2-3 Notes and
the Class A-2-3X Notes, and the Class A-2-4 Notes and the Class
A-2-4X Notes.
At closing, the Class A-2-1 Notes, the Class A-2-2 Notes, the Class
A-2-3 Notes, and the Class A-2-4 Notes have a principal balance of
zero. The aggregate outstanding amount of the Class A-2-1 Notes,
the Class A-2-2 Notes, the Class A-2-3 Notes, and the Class A-2-4
Notes will never exceed $13,500,000 less any principal repayments
on the Refinancing Notes.
The Class A-2-1X Notes, the Class A-2-2X Notes, the Class A-2-3X
Notes, and the Class A-2-4X Notes are interest only notes,
collectively, as "Class A-2-X Notes", have an aggregate notional
amount of zero on the closing date and will not be entitled to any
payments of principal.
The MASCOT Notes combinations with respect to the Class B-R Notes
are the Class B-1 Notes and the Class B-1X Notes, the Class B-2
Notes and the Class B-2X Notes, the Class B-3 Notes and the Class
B-3X Notes, and the Class B-4 Notes and the Class B-4X Notes.
At closing, the Class B-1 Notes, the Class B-2 Notes, the Class B-3
Notes, and the Class B-4 Notes have a principal balance of zero.
The aggregate outstanding amount of the Class B-1 Notes, the Class
B-2 Notes, the Class B-3 Notes, and the Class B-4 Notes will never
exceed $45,000,000 less any principal repayments on the Refinancing
Notes.
The Class B-1X Notes, the Class B-2X Notes, the Class B-3X Notes,
and the Class B-4X Notes are interest only notes, collectively, as
"Class B-X Notes", have an aggregate notional amount of zero on the
closing date and will not be entitled to any payments of
principal.
The MASCOT Notes combinations with respect to the Class C-R Notes
are the Class C-1 Notes and the Class C-1X Notes, the Class C-2
Notes and the Class C-2X Notes, the Class C-3 Notes and the Class
C-3X Notes, and the Class C-4 Notes and the Class C-4X Notes.
At closing, the Class C-1 Notes, the Class C-2 Notes, the Class C-3
Notes, and the Class C-4 Notes have a principal balance of zero.
The aggregate outstanding amount of the Class C-1 Notes, the Class
C-2 Notes, the Class C-3 Notes, and the Class C-4 Notes will never
exceed $22,500,000 less any principal repayments on the Refinancing
Notes.
The Class C-1X Notes, the Class C-2X Notes, the Class C-3X Notes,
and the Class C-4X Notes are interest only notes, collectively, as
"Class C-X Notes", have an aggregate notional amount of zero on the
closing date and will not be entitled to any payments of
principal.
The MASCOT Notes combinations with respect to the Class D-R Notes
are the Class D-1 Notes and the Class D-1X Notes, the Class D-2
Notes and the Class D-2X Notes, the Class D-3 Notes and the Class
D-3X Notes, and the Class D-4 Notes and the Class D-4X Notes.
At closing, the Class D-1 Notes, the Class D-2 Notes, the Class D-3
Notes, and the Class D-4 Notes have a principal balance of zero.
The aggregate outstanding amount of the Class D-1 Notes, the Class
D-2 Notes, the Class D-3 Notes, and the Class D-4 Notes will never
exceed $30,375,000 less any principal repayments on the Refinancing
Notes.
The Class D-1X Notes, the Class D-2X Notes, the Class D-3X Notes,
and the Class D-4X Notes are interest only notes, collectively, as
"Class D-X Notes", have an aggregate notional amount of zero on the
closing date and will not be entitled to any payments of
principal.
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of senior secured loans and
eligible investments, and up to 10.0% of the portfolio may consist
of second lien loans, unsecured loans and non-loan assets.
Nuveen Asset Management, LLC (the "Manager") will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's three year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes and the MASCOT
Notes, a variety of other changes to transaction features will
occur in connection with the refinancing. These include: extension
of the reinvestment period; extensions of the stated maturity and
non-call period; changes to certain collateral quality tests; and
changes to the overcollateralization test levels; the inclusion of
Libor replacement provisions; changes to the definition of "Moody's
Default Probability Rating" and changes to the base matrix and
modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $450,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 3015
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8 years
Methodology Underlying the Rating Action:
The principal methodology used in rating all classes except
interest-only classes was "Moody's Global Approach to Rating
Collateralized Loan Obligations" published in December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes and the MASCOT Notes is
subject to uncertainty. The performance of the Refinancing Notes
and the MASCOT Notes is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and credit
conditions that may change. The Manager's investment decisions and
management of the transaction will also affect the performance of
the Refinancing Notes and MASCOT Notes.
Interest only notes may be upgraded or downgraded, within the
constraints and provisions of the IO methodology, based on lower or
higher realized and expected loss due to an overall improvement or
decline in the credit quality of the reference bonds.
THREE ACCESS 2004-1: S&P Assigns CC (sf) Rating on Class B Notes
----------------------------------------------------------------
S&P Global Ratings affirmed its ratings on 13 classes of notes from
series 2002-1, 2003-1, and 2004-1 issued under Access Group Inc.'s
2002 master indenture.
The transaction is primarily backed by a pool of student loans
originated through the U.S. Department of Education's (ED) Federal
Family Education Loan Program (FFELP).
S&P said, "Our review considered the transaction's collateral
performance and available liquidity, credit enhancement levels, and
capital and payment structure. We also considered the evolving
macroeconomic environment that has resulted from the COVID-19
pandemic, which will likely present employment challenges for
student loan borrowers, and secondary credit factors, such as
credit stability, peer comparisons, and issuer-specific analyses."
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Rationale
The affirmations of the ratings on the senior class A notes reflect
the current credit enhancement levels supporting the notes and
their position in the payment priority. In addition, series
2004-1's class A-2 TAC notes have been in line with their targeted
amortization schedule as of March 2021 distribution date.
The class B notes have credit enhancement in line with the 'CC
(sf)' ratings. The class B notes are currently under
collateralized, as evidenced by the subpar total parity level.
There continues to be insufficient excess spread in the trust to
build total parity, primarily attributable to the increased cost of
funds on the ARS and the low average yield on the Consolidation
loans in the pool. Although the trust currently has the capacity to
meet its obligations, it is unlikely the class B notes will receive
their principal balance in full by their respective final maturity
dates without a significant and consistent improvement in excess
spread (and corresponding build in total parity), which S&P
believes is highly unlikely to occur.
Current Capital Structure
The trust is comprised of one senior TAC note, senior auction-rate
notes, and subordinate auction-rate notes. Given the failed
auction-rate markets, the auction-rate notes are paying at their
maximum auction-rate definitions, based on either LIBOR or the
91-day U.S. Treasury bill rate plus a rating-dependent margin,
which is capped at the net loan rate of the assets.
Payment Structure And Credit Enhancement
On each distribution date, the principal payment is first allocated
to the TAC notes in the amount necessary to reduce the outstanding
principal balance of the notes to their applicable targeted
scheduled principal balance. Then the remaining principal payment
(if any) is allocated to the senior auction-rate notes based on
issuer discretion. The subordinate auction-rate notes will not be
allocated principal payments unless senior parity is at 105.0% and
total parity is 100.5%. Since the total parity level is below the
100.5% threshold, principal payments would be made only to senior
notes.
Currently, the senior TAC note is at its amortization schedule and
the senior auction-rate notes have been allocated principal
payments.
Releases from the trust are subject to the asset release
requirement of 101% parity threshold and the overcollateralization
amount of $1.5 million. Currently, the deal does not meet their
asset release requirement.
Collateral
These transactions primarily comprise Stafford, Consolidation, and
Parent Loan for Undergraduate Student loans that are supported by a
guarantee from the ED of at least 97% of the defaulted loan's
principal and interest. Loans that have been serviced according to
the FFELP guidelines are supported by this guarantee; therefore,
net losses are expected to be minimal.
Although the default levels for the loans in the transaction's pool
may increase due to the COVID-19 pandemic, S&P expects the loans to
maintain their guarantee from ED and net losses to remain low. On
March 16, 2021, S&P Global Ratings affirmed its sovereign rating on
the U.S. (AA+/Stable/A-1+).
Liquidity
S&P said, "Our ratings address our expectations regarding the
payment of timely periodic interest and full repayment of principal
by the notes' legal final maturity dates. The COVID-19 pandemic
relief the issuer offered has resulted in a decline in borrower
payments and defaults (which, in turn, has resulted in lower levels
of guarantee payments on defaults). We believe there is adequate
liquidity for timely periodic interest payments to the noteholders
because the issuer can use all amounts (principal and interest)
collected from the borrowers, as well as other payments received
from ED, to make interest payments to the noteholders.
"In our analysis of the issuer's ability to repay note principal by
the legal final maturity date, we used a principal payment haircut
to determine if the notes are sensitive to the pace of principal
payments. This haircut illustrates the immediate potential
percentage decrease in principal payments that could occur and
still result in full principal repayment by the legal final
maturity date. The higher the principal payment haircut, the more
likely the notes are able to withstand a further decline in
principal payments. Generally, we expect the slowdown of noteholder
principal payments due to COVID-19 pandemic relief will have
greater impact on notes closer to maturity because these notes will
have less time to benefit from borrower payments and default
guarantee payments returning to pre-COVID-19 levels.
"Based on the historical principal paydown of the notes in this
review, the transaction's structural features and the current
parity levels, we expect only the senior notes will be repaid their
principal by their respective legal final maturity dates.
"We will continue to monitor the performance of the student loan
receivables, as well as the available credit enhancement and
liquidity."
Ratings Affirmed
Access Group Inc.
Series 2002-1 class A-3: AA+ (sf)
Series 2002-1 class A-4: AA+ (sf)
Series 2002-1 class B: CC (sf)
Series 2003-1 class A-3: AA+ (sf)
Series 2003-1 class A-4: AA+ (sf)
Series 2003-1 class A-5: AA+ (sf)
Series 2003-1 class A-6: AA+ (sf)
Series 2003-1 class B: CC (sf)
Series 2004-1 class A-2: AAA (sf)
Series 2004-1 class A-3: AA+ (sf)
Series 2004-1 class A-4: AA+ (sf)
Series 2004-1 class A-5: AA+ (sf)
Series 2004-1 class B: CC (sf)
TRYSAIL CLO 2021-1: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Trysail CLO 2021-1
Ltd./Trysail CLO 2021-1 LLC's floating-rate notes.
The note issuance is a CLO securitization backed by primarily
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Trysail CLO 2021-1 Ltd./Trysail CLO 2021-1 LLC
Class X, $3.00 million: AAA (sf)
Class A-1, $166.05 million: AAA (sf)
Class A-F, $18.45 million: AAA (sf)
Class B, $43.50 million: AA (sf)
Class C, $18.00 million: A (sf)
Class D, $18.00 million: BBB- (sf)
Class E, $10.50 million: BB- (sf)
Subordinated notes, $30.30 million: Not rated
UNITED AIRLINES 2014-1: S&P Affirms BB(sf) Rating on Class B Certs
------------------------------------------------------------------
S&P Global Ratings took rating actions on the issue-level ratings
of six United Airlines Inc. enhanced equipment trust certificates
(EETCs) following a review prompted by its publication of new
criteria for rating such issues. S&P removed its "under criteria
observation" (UCO) indicator from the affected ratings.
S&P said, "Our analysis of equipment trust certificate (ETC) or
EETC ratings under the new criteria typically starts with our
issuer credit rating (ICR) on the airline that operates the
aircraft, and adds any applicable notches for the likelihood that
an airline will successfully reorganize in bankruptcy and continue
to make payments on the ETC or EETC (which we call "affirmation
credit"). We may adjust--by reducing those notches--for any adverse
legal considerations that may arise from the jurisdiction in which
the airline operates. For EETCs, we may also add notches for the
likelihood that repossession and sale of the aircraft collateral
will be sufficient to repay the EETC's principal and accrued
interest, avoiding a default, if the airline does not reorganize or
rejects the aircraft securing the certificates (which we call
"collateral credit").
"The rating actions on United's EETCs include four one-notch
downgrades, a one-notch upgrade, and an affirmation. The downgrade
of United's (originally issued by Continental Airlines Inc.) 2001-1
Class A certificates was due to reduced affirmation credit dictated
by our new criteria in this case. The downgrades of United
(Continental) 2012-2 Class A, United 2014-1 Class A, and United
2014-2 Class A certificates were all dictated by a provision in the
new criteria that if our ICR on an airline is 'B' or 'B+' (the ICR
on United is 'B+') and there is a difference of more than ten
percentage points between the loan-to-value (LTV) calculated using
appraised base value and a higher (worse) LTV calculated using
appraised current market value, then we use an average of those two
LTVs. We had previously focused on LTV calculated using base value
for these EETCs, and the higher average LTV caused us to assign
less collateral credit for these EETCs.
"The upgrade of United 2007-1 Class B certificates was because our
new criteria are more prescriptive as to how we assign collateral
credit, and the combination of collateral quality as we assess it
and the LTV justified higher collateral credit.
"Lastly, we affirmed United's 2014-1 Class B certificates because
the impact of the new criteria were not sufficient to merit a
change.
Ratings List
UNITED AIRLINES INC.
Issuer Credit Rating B+/Neg/--
RATINGS AFFIRMED
Equipment Trust Certificates
4.75% 2014-1 Class B BB(sf)
RATINGS LOWERED
TO: FROM:
Equipment Trust Certificates
6.70% (Continental) 2001-1 Class A BBB+(sf) A-(sf)
4.00% (Continental) 2012-2 Class A BBB-(sf) BBB(sf)
4.00% 2014-1 Class A BBB(sf) BBB+(sf)
3.75% 2014-2 Class A BBB+(sf) A-(sf)
RATINGS RAISED
TO: FROM:
EQUIPMENT TRUST CERTIFICATES
6.90% (Continental) 2007-1 Class B BBB+(sf) BBB(sf)
VERUS SECURITIZATION 2021-3: S&P Assigns 'B-' Rating on B-2 Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Verus Securitization
Trust 2021-3's mortgage-backed notes.
The note issuance is an RMBS securitization backed by primarily
first-lien, fixed-rate, and adjustable-rate residential mortgage
loans, including mortgage loans with initial interest-only periods
and/or balloon terms. The loans are secured primarily by
single-family residences, planned unit developments, two- to
four-family residential properties, condominiums, mixed-use
properties, and five- to 10-unit multi-family residential
properties to both prime and nonprime borrowers. The pool has 922
loans backed by 975 properties, which are primarily non-qualified
mortgage/ATR compliant and ATR-exempt loans.
S&P said, "Since we assigned preliminary ratings on June 16, 2021,
the sponsor, VMC Asset Pooler LLC, removed four mortgage loans from
the collateral pool and reduced the class A-1, A-2, A-3, M-1, B-1,
B-2, and B-3 note amounts as a result of its ongoing portfolio
management. However, there were no changes to the credit
enhancement on these notes or our loss coverage levels. After
analyzing the revised bond balances, we assigned ratings in line
with our preliminary ratings."
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty framework;
-- The transaction's geographic concentration;
-- The mortgage aggregator, Invictus Capital Partners; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and liquidity
available in the transaction.
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Ratings Assigned
Verus Securitization Trust 2021-3
Class A-1, $373,330,000: AAA (sf)
Class A-2, $32,555,000: AA (sf)
Class A-3, $51,720,000: A (sf)
Class M-1, $28,879,000: BBB (sf)
Class B-1, $17,590,000: BB (sf)
Class B-2, $13,127,000: B- (sf)
Class B-3, $7,876,872: Not rated
Class A-IO-S, notional(i): Not rated
Class XS, notional(i): Not rated
Class DA: Not rated
Class R: Not rated
(i)The notional amount equals the aggregate stated principal
balance of loans in the pool.
WELLS FARGO 2021-RR1: Fitch Assigns B+ Rating on B-5 Debt
---------------------------------------------------------
Fitch Ratings assigns the following ratings to Wells Fargo
Mortgage-Backed Securities 2021-RR1 Trust (WFMBS 2021-RR1).
DEBT RATING PRIOR
---- ------ -----
WFMBS 2021-RR1
A-1 LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-IO1 LT AAAsf New Rating AAA(EXP)sf
A-IO10 LT AAAsf New Rating AAA(EXP)sf
A-IO11 LT AAAsf New Rating AAA(EXP)sf
A-IO2 LT AAAsf New Rating AAA(EXP)sf
A-IO3 LT AAAsf New Rating AAA(EXP)sf
A-IO4 LT AAAsf New Rating AAA(EXP)sf
A-IO5 LT AAAsf New Rating AAA(EXP)sf
A-IO6 LT AAAsf New Rating AAA(EXP)sf
A-IO7 LT AAAsf New Rating AAA(EXP)sf
A-IO8 LT AAAsf New Rating AAA(EXP)sf
A-IO9 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-2 LT Asf New Rating A(EXP)sf
B-3 LT BBB+sf New Rating BBB+(EXP)sf
B-4 LT BB+sf New Rating BB+(EXP)sf
B-5 LT B+sf New Rating B+(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The certificates are supported by 325 prime fixed-rate mortgage
loans with a total balance of approximately $313 million as of the
cutoff date. All of the loans were originated by Wells Fargo Bank,
N.A. (Wells Fargo). This is the 13th post-crisis issuance from
Wells Fargo.
KEY RATING DRIVERS
Very High-Quality Mortgage Pool (Positive): The collateral
attributes are among the strongest of post-crisis RMBS rated by
Fitch. The pool consists almost entirely of 30-year fixed-rate
fully amortizing loans to borrowers with strong credit profiles,
low leverage and large liquid reserves. All of the loans satisfy
the Ability to Repay Rule (ATR); approximately 69.4% of the loans
are classified as Safe Harbor Qualified Mortgages (SHQM) and 30.6%
are designated as Non-Qualified Mortgages (NQM). As of the closing
date, the loans are seasoned an average of approximately 11.8
months.
The pool has a weighted average (WA) original FICO score of 774,
which is indicative of very high credit-quality borrowers.
Approximately 81.7% of the pool has original FICO scores at or
above 750. In addition, the original WA combined loan to value
(CLTV) ratio of 74.1% represents solid borrower equity in the
property. The pool's attributes, together with Wells Fargo's sound
origination practices, support Fitch's very low default risk
expectations.
Non-Qualified Mortgage (Negative): All of the loans in this
transaction were underwritten to guidelines that satisfy the ATR
Rule; however, Wells Fargo determined that 69.4% of the loans meet
the QM designation based on its underwriting guidelines. Fitch's
'AAAsf' loss was increased by 4 bps to account for the potential
risk of foreclosure challenges under the ATR Rule.
High Geographic Concentration (Negative): Approximately 57.7% of
the pool is concentrated in California with relatively average MSA
concentration. The largest MSA concentration is in the San Jose MSA
(20.3%), followed by the San Francisco MSA (17.1%) and the Los
Angeles MSA (12.6%). The top three MSAs account for 50.0% of the
pool. As a result, an additional penalty of approximately 15% was
applied to the pool's lifetime default expectations.
Straight Forward Deal Structure (Mixed): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure whereby the subordinate classes receive
only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
Full Servicer Advancing (Neutral): The pool benefits from advances
of delinquent principal and interest until the primary servicer of
the pool, Wells Fargo, deems them nonrecoverable. Fitch's loss
severities reflect reimbursement of amounts advanced by the
servicer from liquidation proceeds based on its liquidation
timelines assumed at each rating stress. In addition, the CE for
the rated classes has some cushion for recovery of servicer
advances for loans modified following a payment forbearance. To
mitigate tail risk, which arises as the pool seasons and fewer
loans are outstanding, a subordination floor of 1.45% of the
original balance will be maintained for the senior certificates.
Extraordinary Expense Treatment (Neutral): The trust provides for
expenses, including indemnification amounts, reviewer fees and
costs of arbitration, to be paid by the net WA coupon (WAC) of the
loans, which does not affect the contractual interest due on the
certificates. Furthermore, the expenses to be paid from the trust
are capped at $350,000 per annum, with the exception of the
independent reviewer breach review fee, which can be carried over
each year, subject to the cap until paid in full.
Updated Economic Risk Factor (ERF) (Positive): Consistent with the
Additional Scenario Analysis section of Fitch's "U.S. RMBS
Coronavirus-Related Analytical Assumptions" criteria, Fitch will
consider applying additional scenario analysis based on stressed
assumptions as described in the section to remain consistent with
significant revisions to its macroeconomic baseline scenario or if
actual performance data indicate the current assumptions require
reconsideration.
In response to revisions made to Fitch's macroeconomic baseline
scenario, observed actual performance data, and the unexpected
development in the health crisis arising from the advancement and
availability of coronavirus vaccines, Fitch reconsidered the
application of the coronavirus-related ERF floors of 2.0 and used
ERF floors of 1.5 and 1.0 for the 'BBsf' and 'Bsf' rating stresses,
respectively.
Fitch's March 2021 "Global Economic Outlook" and related base-line
economic scenario forecasts were revised to a 6.2% U.S. GDP growth
for 2021 and 3.3% for 2022, following the negative 3.5% GDP growth
in 2020. Additionally, Fitch's U.S. unemployment forecasts for 2021
and 2022 are 5.8% and 4.7%, respectively, down from 8.1% in 2020.
These revised forecasts support Fitch reverting to the 1.5 and 1.0
ERF floors described in its "U.S. RMBS Loan Loss Model Criteria"
report.
RATING SENSITIVITIES
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
The implied rating sensitivities are only an indication of some of
the potential outcomes and do not consider other risk factors that
the transaction may become exposed to or that may be considered in
the surveillance of the transaction. Sensitivity analyses was
conducted at the state and national levels to assess the effect of
higher MVDs for the subject pool as well as lower MVDs, illustrated
by a gain in home prices.
Factor that could, individually or collectively, lead to a negative
rating action/downgrade:
-- This defined negative rating sensitivity analysis demonstrates
how the ratings would react to steeper MVDs at the national
level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in
addition to the model-projected 37.1% at 'AAA'. The analysis
indicates that there is some potential rating migration with
higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factor that could, individually or collectively, lead to a positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to negative MVDs at the national
level, or in other words positive home price growth with no
assumed overvaluation. The analysis assumes positive home
price growth of 10%. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is
potential positive rating migration for all of the rated
classes. Specifically, a 10% gain in home prices would result
in a full category upgrade for the rated class excluding those
being assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
Fitch has added a Coronavirus Sensitivity Analysis that includes a
prolonged health crisis resulting in depressed consumer demand and
a protracted period of below-trend economic activity that delays
any meaningful recovery to beyond 2021. Under this severe scenario,
Fitch expects the ratings to be impacted by changes in its
sustainable home price model due to updates to the model's
underlying economic data inputs. Any long-term effect arising from
coronavirus disruptions on these economic inputs will likely affect
both investment and speculative grade ratings.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E ("Form 15E") as
prepared by Clayton Services, LLC. The third-party due diligence
described in Form 15E focused on a compliance review, credit review
and valuation review. The due diligence company performed a review
on 100% of the loans. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment to
its analysis: loans with due diligence received a credit in the
loss model. This adjustment reduced the 'AAAsf' expected losses by
13 bps.
ESG CONSIDERATIONS
WFMBS 2021-RR1 has an Environmental, Social and Corporate
Governance (ESG) Relevance Score (RS) of '4+' for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in WFMBS 2021-RR1 including strong R&W and transaction due
diligence as well as a strong originator and servicer which
resulted in a reduction in expected losses.
WFMBS 2021-RR1 also has an ESG RS of '4+' for Exposure to
Environmental Impacts due to moderate geographic
concentration/catastrophe risk. This has a positive impact on the
credit profile and is relevant to the ratings in conjunction with
other factors.
Unless otherwise disclosed in this section, the highest level of
ESG Credit Relevance is a Score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
WELLS FARGO 2021-RR1: Moody's Rates Class B-5 Certs 'Ba3'
---------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
twenty-five classes of residential mortgage-backed securities
issued by Wells Fargo Mortgage Backed Securities 2021-RR1 Trust
(WFMBS 2021-RR1). The ratings range from Aaa (sf) to Ba3 (sf). The
transaction represents the thirteenth RMBS issuance sponsored by
Wells Fargo Bank, N.A. (Wells Fargo Bank, the sponsor and mortgage
loan seller) since 2018 and features mortgage loans with strong
collateral characteristics.
WFMBS 2021-RR1 is second prime issuance by Wells Fargo Bank in
2021, 30.6% (by stated principal balance) of the pool comprises
non-qualified mortgage loans. In total, the pool consists of 325
primarily 30year, fixed rate, prime residential mortgage loans with
an unpaid principal balance of $312,766,055.
In response to the COVID-19 national emergency, Wells Fargo has
temporarily transitioned to allowing exterior-only appraisals,
instead of a full interior and exterior inspection of the subject
property, on many mortgage transactions. Majority of the loan pool,
approximately 51.2% by unpaid principal balance, does not have a
full appraisal that includes an exterior and an interior inspection
of the property. Instead, these loans have an exterior-only
appraisal.
The mortgage loans for this transaction were originated by Wells
Fargo Bank, through its retail and correspondent channels, in
accordance with its underwriting guidelines. In this transaction,
98 loans are designated as non-QM and 227 loans are designated as
QM under the QM safe harbor rules. For Non-QM mortgage loans (30.6%
by unpaid principal balance), this transaction does not include
representations from the sponsor that the mortgage loans in the
portfolio are Qualified Mortgage (QM) loans under the Ability to
Repay (ATR) rules in the Truth-in-Lending Act (TILA). However, the
sponsor will make certain representations that the mortgage loans
will comply with the ATR rules. As a result, the transaction is
subject to the Dodd-Frank Act's risk retention rules and the
sponsor will retain 5% of the securitized exposure in the
transaction.
The pool has strong credit quality and consists of borrowers with
high FICO scores, significant equity in their properties and liquid
cash reserves. There are 4 loans in the pool with prior delinquency
history as a result of errors in setting up automatic payments.
Also, borrowers of nine loans in the pool had previously entered
into a forbearance plan but continued making their mortgage
payments while in forbearance and were thus never delinquent during
the forbearance period. The weighted average (WA) seasoning of the
pool is approximately 10 months. Additionally, any borrowers that
request forbearance between the cut-off date and closing will be
repurchased within 30 days of closing.
Wells Fargo Bank will service all the loans and will also be the
master servicer for this transaction. Servicing compensation is
subject to a step-up incentive fee structure and the servicer will
advance delinquent principal and interest (P&I), unless deemed
nonrecoverable.
The credit quality of the transaction is further supported by an
unambiguous representation and warranty (R&W) framework and a
shifting interest structure that benefits from a senior floor and a
subordinate floor. Moody's coded the cash flow to each of the
certificate classes using Moody's proprietary cash flow tool.
The complete rating actions are as follows:
Issuer: Wells Fargo Mortgage Backed Securities 2021-RR1 Trust
Cl. A-1, Assigned Aaa (sf)
Cl. A-2, Assigned Aaa (sf)
Cl. A-3, Assigned Aaa (sf)
Cl. A-4, Assigned Aaa (sf)
Cl. A-5, Assigned Aaa (sf)
Cl. A-6, Assigned Aaa (sf)
Cl. A-7, Assigned Aaa (sf)
Cl. A-8, Assigned Aaa (sf)
Cl. A-9, Assigned Aaa (sf)
Cl. A-10, Assigned Aaa (sf)
Cl. A-11, Assigned Aaa (sf)
Cl. A-12, Assigned Aaa (sf)
Cl. A-13, Assigned Aaa (sf)
Cl. A-14, Assigned Aaa (sf)
Cl. A-15, Assigned Aaa (sf)
Cl. A-16, Assigned Aaa (sf)
Cl. A-17, Assigned Aaa (sf)
Cl. A-18, Assigned Aaa (sf)
Cl. A-19, Assigned Aaa (sf)
Cl. A-20, Assigned Aaa (sf)
Cl. B-1, Assigned Aa3 (sf)
Cl. B-2, Assigned A3 (sf)
Cl. B-3, Assigned Baa3 (sf)
Cl. B-4, Assigned Ba1 (sf)
Cl. B-5, Assigned Ba3 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
In response to COVID-19, Wells Fargo Home Lending (WFHL) has
temporarily been allowing exterior-only appraisals. The majority of
the mortgage loans (51.2% by unpaid principal balance) have been
evaluated using this alternative exterior-only appraisal method.
Since the exterior-only appraisal only covers the outside of the
property, there is a risk that the property condition cannot be
verified to the same extent had the appraiser been provided access
to the interior of the home. However, Moody's did not make any
adjustments to Moody's losses to loans where an exterior-only
appraisal was conducted by taking into account certain mitigating
factors, some of which relate to the reliability of Wells Fargo's
property valuation policies and procedures, experienced valuation
team, and robust appraisal oversight along with a well-defined
scope of work for exterior-only appraisals, which help remove
uncertainty risk associated with lack of full-appraisals for such
mortgage loans.
Moody's expected loss for this pool in a baseline scenario-mean is
0.21%, in a baseline scenario-median is 0.09%, and reaches 2.78% at
a stress level consistent with Moody's Aaa ratings.
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of consumer assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's increased its model-derived median expected losses by
10.00% (5.88% for the mean) and Moody's Aaa loss by 2.50% to
reflect the likely performance deterioration resulting from the
slowdown in US economic activity due to the coronavirus outbreak.
These adjustments are lower than the 15% median expected loss and
5% Aaa loss adjustments Moody's made on pools from deals issued
after the onset of the pandemic until February 2021. Moody's
reduced adjustments reflect the fact that the loan pool in this
deal does not contain any loans to borrowers who are not currently
making payments. For newly originated loans, post-COVID
underwriting takes into account the impact of the pandemic on a
borrower's ability to repay the mortgage. For seasoned loans, as
time passes, the likelihood that borrowers who have continued to
make payments throughout the pandemic will now become non-cash
flowing due to COVID-19 continues to decline.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety
Collateral Description
The WFMBS 2021-RR1 transaction is a securitization of 325 primarily
30-year, fixed rate, prime residential mortgage loans with an
unpaid principal balance of $312,766,055. The mortgage loans in
this transaction have strong borrower characteristics with a WA
original FICO score of 783 and a weighted-average combined loan
to-value ratio (LTV) of 74.1%. In addition, by stated principal
balance, 12.9% of the borrowers are self-employed, refinance loans
account for approximately 26.8% (inclusive of construction to
permanent loans), of which 0.5% are cash-out loans. Construction to
permanent loans account for 8.9% (by stated principal balance) of
the pool. The construction to permanent is a two-part loan where
the first part is for the construction and then it becomes a
permanent mortgage once the property is complete. For such mortgage
loans in the pool, the construction was complete and because the
borrower cannot receive cash from the permanent loan proceeds or
anything above the construction cost.
Approximately 75.2% (by stated principal balance) of the properties
backing the mortgage loans are located in five states: California,
New Jersey, New York, Massachusetts and Washington with 57.7% (by
stated principle balance) of the properties located in California.
Properties located in the states of Texas, Virginia, Florida,
Maryland and Oregon round out the top ten states by loan stated
principal balance. Approximately 87.9% (by stated principal
balance) of the properties backing the mortgage loans included in
WFMBS 2021-RR1 are located in these ten states.
Origination Quality
Wells Fargo Bank, N.A. (Aa1 long term deposit; Aa2 long term debt)
is an indirect, wholly-owned subsidiary of Wells Fargo & Company
(long term debt A2). Wells Fargo & Company is a U.S. bank holding
company with approximately $1.97 trillion in assets and
approximately 266,000 employees as of June 30, 2020, which provides
banking, insurance, trust, mortgage and consumer finance services
throughout the United States and internationally. Wells Fargo Bank
has sponsored or has been engaged in the securitization of
residential mortgage loans since 1988. Wells Fargo Home Lending
(WFHL) is a key part of Wells Fargo & Company's diversified
business model. The mortgage loans for this transaction are
originated by WFHL, through its retail and correspondent channels,
in accordance with its underwriting guidelines. The company uses a
solid loan origination system which include embedded features such
as a proprietary risk scoring model, role based business rules and
data edits that ensure the quality of loan production.
In this transaction, no mortgage loans were underwritten
specifically to Fannie Mae and Freddie Mac, i.e.
government-sponsored enterprise (GSE) guidelines. All mortgage
loans were underwritten and priced to WFHL's non-conforming
underwriting guidelines.
WFHL does not have underwriting guidelines that relate solely to
mortgage loans that are intended to be Non-QM or QM and therefore,
the underwriting guidelines are applicable to both. The term
"non-QM" generally applies to types of loans or mortgage products
with certain characteristics, such as interest-only loans, negative
amortization loans and most balloon loans, loans not underwritten
in compliance with Appendix Q, among others. However, the
identification of a mortgage loans as a non-QM is based upon WFHL's
categorization of such mortgage loans under its underwriting
policies and procedures in place at the time of origination of such
mortgage loans (including WFHL's interpretation of Appendix Q).
Other lenders or market participants may interpret and apply the
ATR rules differently than WFHL and therefore may arrive at
different conclusions regarding whether any such mortgage loans
would meet the definition of a QM or is otherwise a non-QM mortgage
loan. Therefore, WFHL may classify a mortgage loan at the time it
was originated under its guidelines as a QM that it would have
previously classified (or would in the future classify) as a non-QM
loan or vice versa.
The two main underwriting factors which WFHL deems as non-QM that
the TPR firm does not are (1) self-prepared year-to-date profit and
loss (P&L) statement and balance sheet (while not specified in
QM/Appendix Q, WFHL still requires two years of personal and
business tax returns) and (2) for self-employed borrowers,
documentation which has been waived, self -prepared or does not
exist such as the P&L and/or balance sheet and was deemed
non-material or not used in the credit decision process.
It should be noted that WFHL implemented a number of policy changes
to address the Covid-19 environment. Additionally, WFHL had
temporarily stopped originating non-conforming correspondent
mortgage loans from April 2020 through December 2020.
After considering the company's origination practices, Moody's made
no additional adjustments to Moody's base case and Aaa loss
expectations for origination.
Third Party Review
One independent third-party review (TPR) firm, Clayton Services LLC
(Clayton), was engaged to conduct due diligence for the credit,
regulatory compliance, property valuation and data accuracy for all
of the 329 mortgage loans in the initial population of this
transaction. The TPR results indicate that the majority of reviewed
mortgage loans were in compliance with the underwriting guidelines,
no material compliance or data issues, and no appraisal defects.
For the one mortgage loan with a level "C" grade the exception was
related to variance of secondary valuation being more than -10% as
compared to the original appraisal. However, compensating factors
such as low LTV and DTI were cited. Moody's did not make any
additional adjustments in Moody's model analysis to account for
this exception.
The TPR firm's property valuation review consisted of reviewing the
valuation materials utilized at origination to ensure the appraisal
report was complete and in conformity with the underwriting
guidelines. The TPR firm also compared third-party valuation
products to the original appraisals. The TPR firm generally
obtained a collateral desktop analysis (CDA) through an independent
third-party valuation company to determine whether such CDA
supported the appraisal value used in connection with the
origination of the mortgage loan within a negative 10% variance.
Instances where 10% negative variances (between the CDA and the
appraised value) were reported, a field review was ordered to
reconcile value per the original appraisal. Additionally, any loan
more than 12 months old received new Broker Price Opinion (BPO)
value.
Finally, the majority of the data integrity errors in the initial
population of the pool were due to observed differences in cash
reserves (35 loans), CLTV (nine (9) loans), DTI (six (6) loans),
original appraised value, property type and sales price (five (5)
loans) each, original loan to value ( three (3) loans), and first
payment date and maturity date (one (1) loan) each. Moody's did not
make any adjustments in Moody's model analysis for data integrity
since data discrepancies were suitably addressed.
Representation & Warranties
Moody's assessed the R&W framework for this transaction as
adequate. Moody's analyzed the strength of the R&W provider, the
R&Ws themselves and the enforcement mechanisms. The R&W provider is
highly rated, the breach reviewer is independent and the breach
review process is thorough, transparent and objective. As a result,
Moody's did not make any additional adjustment to Moody's base case
and Aaa loss expectations for R&Ws.
Wells Fargo Bank, as the originator, makes the loan-level R&Ws for
the mortgage loans. The loan-level R&Ws are strong and, in general,
either meet or exceed the baseline set of credit-neutral R&Ws
Moody's have identified for US RMBS. Further, R&W breaches are
evaluated by an independent third party using a set of objective
criteria to determine whether any R&Ws were breached when mortgage
loans become 120 days delinquent, the property is liquidated at a
loss above a certain threshold, or the loan is modified by the
servicer. Similar to J.P. Morgan Mortgage Trust transactions, this
transaction contains a "prescriptive" R&W framework. These reviews
are prescriptive in that the transaction documents set forth
detailed tests for each R&W that the independent reviewer will
perform.
It should be noted that exceptions exist for certain excluded
disaster mortgage loans that trip the delinquency trigger. These
excluded disaster mortgage loans include COVID-19 forbearance
mortgage loans or any other loan with respect to which (a) the
related mortgaged property is located in an area that is subject to
a major disaster declaration by either the federal or state
government and (b) has either been modified or is being reported
delinquent by the servicer as a result of a forbearance, deferral
or other loss mitigation activity relating to the subject disaster.
Such excluded disaster mortgage loans may be subject to a review in
future periods if certain conditions are satisfied.
Tail Risk and Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
shrinks, senior bonds are exposed to increased performance
volatility, known as tail risk. The transaction provides for a
senior subordination floor of 1.45% of the closing pool balance,
which mitigates tail risk by protecting the senior bonds from
eroding credit enhancement over time. Additionally, there is a
subordination lock-out amount which is 1.45% of the closing pool
balance.
Moody's calculate the credit neutral floors for a given target
rating as shown in Moody's principal methodology. The senior
subordination floor of 1.45% and subordinate floor of 1.45% are
consistent with the credit neutral floors for the assigned ratings.
Transaction Structure
The securitization has a shifting interest structure that benefits
from a senior floor and a subordinate floor. Funds collected,
including principal, are first used to make interest payments and
then principal payments to the senior bonds, and then interest and
principal payments to each subordinate bond. As in all transactions
with shifting interest structures, the senior bonds benefit from a
cash flow waterfall that allocates all unscheduled principal
collections to the senior bond for a specified period of time and
increasing amounts of unscheduled principal collections to the
subordinate bonds thereafter, but only if loan performance
satisfies delinquency and loss tests.
All certificates in this transaction are subject to a net WAC cap.
Realized losses are allocated reverse sequentially among the
subordinate and senior support certificates and on a pro-rata basis
among the super senior certificates.
Because it includes non-QM loans, the transaction is subject to the
Dodd-Frank Act's risk retention rules. In this transaction, the
sponsor or one or more majority owned affiliates of the sponsor
will retain a 5% vertical residual interest in all the offered
certificates. The sponsor or one or more majority owned affiliates
of the sponsor will also be the holder of the residual
certificate.
Servicing Arrangement
In WFMBS 2021-RR1, unlike other prime jumbo transactions, Wells
Fargo Bank acts as servicer, master servicer, securities
administrator and custodian of all of the mortgage loans for the
deal. The servicer will be primarily responsible for funding
certain servicing advances and delinquent scheduled interest and
principal payments for the mortgage loans, unless the servicer
determines that such amounts would not be recoverable. The master
servicer and servicer will be entitled to be reimbursed for any
such monthly advances from future payments and collections
(including insurance and liquidation proceeds) with respect to
those mortgage loans (also see COVID-19 impacted borrowers section
for additional information).
In the case of the termination of the servicer, the master servicer
must consent to the trustee's selection of a successor servicer,
and the successor servicer must have a net worth of at least $15
million and be Fannie or Freddie approved. The master servicer
shall fund any advances that would otherwise be required to be made
by the terminated servicer (to the extent the terminated servicer
has failed to fund such advances) until such time as a successor
servicer is appointed. Additionally, in the case of the termination
of the master servicer, the trustee will be required to select a
successor master servicer in consultation with the depositor. The
termination of the master servicer will not become effective until
either the trustee or successor master servicer has assumed the
responsibilities and obligations of the master servicer which also
includes the advancing obligation.
After considering Wells Fargo Bank's servicing practices, Moody's
did not make any additional adjustment to Moody's losses.
COVID-19 Impacted Borrowers
As of the cut-off date, no mortgage loans in the pool are currently
subject to an active COVID-19 related forbearance plan. However,
borrowers of nine loans in the pool had previously entered into a
forbearance plan but continued making their mortgage payments while
in forbearance and were thus never delinquent during the
forbearance period. The mortgage loan seller will covenant in the
mortgage loan purchase agreement to repurchase at the repurchase
price within 30 days of the closing date any mortgage loan with
respect to which the related borrower requests or enters into a
COVID-19 related forbearance plan after the cut-off date but on or
prior to the closing date. In the event that after the closing date
a borrower enters into or requests a COVID19 related forbearance
plan, such mortgage loan (and the risks associated with it) will
remain in the mortgage pool.
In the event the servicer enters into a forbearance plan with a
COVID-19 impacted borrower of a mortgage loan, the servicer will
report such mortgage loan as delinquent (to the extent payments are
not actually received from the borrower) and the servicer will be
required to make advances in respect of delinquent interest and
principal (as well as servicing advances) on such loan during the
forbearance period (unless the servicer determines any such
advances would be a nonrecoverable advance). At the end of the
forbearance period, if the borrower is able to make the current
payment on such mortgage loan but is unable to make the previously
forborne payments as a lump sum payment or as part of a repayment
plan, the servicer anticipates it will modify such mortgage loan
and any forborne amounts will be deferred as a non-interest bearing
balloon payment that is due upon the maturity of such mortgage
loan.
At the end of the forbearance period, if the borrower repays the
forborne payments via a lump sum or repayment plan, advances will
be recovered via the borrower payment(s). In an event of
modification, Wells Fargo Bank will recover advances made during
the period of COVID-19 related forbearance from pool level
collections.
Any principal forbearance amount created in connection with any
modification (whether as a result of a COVID19 forbearance or
otherwise) will result in the allocation of a realized loss and to
the extent any such amount is later recovered, will result in the
allocation of a subsequent recovery.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
April 2020.
WFRBS COMMERCIAL 2014-C19: Moody's Affirms Ba1 Rating on X-B Certs
------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on ten classes
in WFRBS Commercial Mortgage Trust 2014-C19, Commercial
Pass-Through Certificates, Series 2014-C19 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Aug 28, 2019 Affirmed Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Aug 28, 2019 Affirmed Aaa
(sf)
Cl. A-5, Affirmed Aaa (sf); previously on Aug 28, 2019 Affirmed Aaa
(sf)
Cl. A-S, Affirmed Aaa (sf); previously on Aug 28, 2019 Affirmed Aaa
(sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Aug 28, 2019 Affirmed
Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Aug 28, 2019 Affirmed Aa3
(sf)
Cl. C, Affirmed A3 (sf); previously on Aug 28, 2019 Affirmed A3
(sf)
Cl. PEX**, Affirmed A1 (sf); previously on Aug 28, 2019 Affirmed A1
(sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Aug 28, 2019 Affirmed
Aaa (sf)
Cl. X-B*, Affirmed Ba1 (sf); previously on Aug 28, 2019 Affirmed
Ba1 (sf)
* Reflects interest-only classes
** Reflects exchangeable classes
RATINGS RATIONALE
The ratings on the P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on the two IO classes were affirmed based on the credit
quality of the referenced classes.
The rating on class PEX was affirmed due to the credit quality of
the referenced exchangeable classes.
Moody's rating action reflects a base expected loss of 4.9% of the
current pooled balance, compared to 3.8% at Moody's last review.
Moody's base expected loss plus realized losses is now 5.5% of the
original pooled balance, compared to 4.8% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
https://bit.ly/3y2IX4K.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
exchangeable classes and interest-only classes was "Approach to
Rating US and Canadian Conduit/Fusion CMBS" published in September
2020.
DEAL PERFORMANCE
As of the June 2021 distribution date, the transaction's aggregate
certificate balance has decreased by 18% to $900 million from
$1.104 billion at securitization. The certificates are
collateralized by 96 mortgage loans ranging in size from less than
1% to 9.3% of the pool, with the top ten loans (excluding
defeasance) constituting 41% of the pool. Fourteen loans,
constituting 8.9% of the pool, have defeased and are secured by US
government securities. The pool contains eight low leverage
cooperative loans, constituting 3.5% of the pool balance, that were
too small to credit assess; however, have Moody's leverage that is
consistent with other loans previously assigned an investment grade
Structured Credit Assessments.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 30, compared to 33 at Moody's last review.
As of the June 2021 remittance report, loans representing 82% were
current or within their grace period on their debt service
payments, 12% were beyond their grace period but less than 30 days
delinquent and 6% were at least 30 days delinquent.
Twenty-four loans, constituting 34% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Three loans have been liquidated from the pool, contributing to an
aggregate realized loss of $17 million (for an average loss
severity of 71%). Three loans, constituting 3.5% of the pool, are
currently in special servicing. All of the specially serviced loans
have transferred to special servicing since April 2020.
The largest specially serviced loan is the Residence Inn Houston --
Katy Mills Loan ($13.8 million -- 1.5% of the pool), which is
secured by a 126-room extended stay hotel located 29 miles west of
the Houston CBD. The property operates under a Franchise Agreement
with Marriott which expires in June 2030. The loan transferred to
special servicing in April 2020 in relation to the coronavirus
impact on the property. A hard lockbox is in place and the lender
is trapping all cashflow. Lender has engaged counsel to commence
enforcement remedies and discussions with the borrower are
ongoing.
The remaining two specially serviced loans are secured by another
hotel property and a single-tenant retail property with a gym
tenant. Moody's estimates an aggregate $8.9 million loss for the
specially serviced loans.
Moody's has also assumed a high default probability for two poorly
performing loans, constituting 5.0% of the pool, and has estimated
an aggregate loss of $15.6 million (a 35% expected loss) from these
troubled loans. The largest troubled loan is the Brunswick Square
loan ($26.3 million -- 2.9% of the pool), which is secured by
293,000 square feet (SF) component of a 760,000 SF enclosed
regional mall located in East Brunswick, NJ. The property is
anchored by J.C. Penney and Macy's, both of which own their
respective improvements. Collateral junior anchors include Barnes &
Noble, Old Navy, Forever 21 and a 13-screen Starplex Cinemas,
however, the mall does not contain a food court. Per the December
2020 rent roll, the total property was 95% leased and collateral
was 88% leased. In June 2021, the sponsor, Washington Prime Group
(WPG) filed for Chapter 11 bankruptcy. The Brunswick Square Mall is
identified as a non-core asset by WPG. The loan is paid through
April 2021.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile. The MLTV reported in this publication
reflects the MLTV before the adjustments described in the
methodology.
Moody's received full year 2019 operating results for 92% of the
pool, and full or partial year 2020 operating results for 79% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 90%, compared to 96% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 17% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10%.
Moody's actual and stressed conduit DSCRs are 1.60X and 1.26X,
respectively, compared to 1.55X and 1.19X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 22% of the pool balance. The
largest loan is the Renaissance Chicago Downtown Loan ($84.7
million -- 9.3% of the pool), which is secured by a 27-story,
553-key, full-service hotel located in downtown Chicago, Illinois.
The property is encumbered by a ground lease which expires in June
2087 and resets every ten years based on the Fair Market Value of
the land, with the most recent reset occurring in June 2018.
Amenities include a conference center, fitness center, and indoor
swimming pool. The loan had transferred to special servicing in
September 2020 due to imminent maturity default. The loan had an
initial maturity in January 2021, and the borrower had requested a
maturity extension due to their inability to obtain refinancing as
a result of the coronavirus impact on the property. Property
performance had improved since securitization and the year-end 2019
NOI was 25% than in 2014. The loan was modified, with an extended
maturity date in July 2022. The loan was returned to the master
servicer. The loan has amortized 7% since securitization and
Moody's LTV and stressed DSCR are 108% and 1.12X, respectively,
compared to 112% and 1.09X at the last review.
The second largest loan is the Lifetime Fitness Portfolio Loan ($60
million -- 6.7% of the pool), which is secured by five
single-tenant health and fitness centers located across four
states: Arizona, Virginia, Illinois, and Texas. All five properties
are 100% leased, triple-net, to Lifetime Fitness, Inc. through
January 2029. The loan benefits from amortization and has paid down
approximately 18% since securitization. The loan structure allows
for the substitution of two properties and the partial release of
up to four properties, which Moody's accounted for in its analysis.
Moody's LTV and stressed DSCR are 84% and 1.63X, respectively,
compared to 92% and 1.50X at the last review.
The third largest loan is the Nordic Cold Storage Portfolio Loan
($52 million -- 5.8% of the pool), which is secured by eight
cross-collateralized, cross-defaulted cold storage,
temperature-controlled warehouse and distribution facilities across
four states: Alabama, Georgia, North Carolina, and Mississippi. The
facilities are 100% leased by two affiliated tenants, Nordic
Logistics and Warehousing, LLC and Nordic Savanna, LLC, which
together lease a total of 907,304 square feet (SF), subject to a
single triple-net Master Lease which runs through November 2033 and
contains no termination options. After an initial 5-year interest
only period, the loan began amortizing in April 2019 and has
amortized 3.2% since securitization. Moody's LTV and stressed DSCR
are 111% and 1.00X, respectively, compared to 114% and 0.97X at the
last review.
WIND RIVER 2019-1: S&P Assigns B-(sf) Rating on $3MM Cl. F-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement notes and the new class X notes from Wind
River 2019-1 CLO Ltd./Wind River 2019-1 CLO LLC, a CLO originally
issued in April 2019 that is managed by First Eagle Alternative
Credit EU LLC. At the same time, S&P withdrew its ratings on the
original class A-1, A-2, B, C, D, and E notes following payment in
full on the June 23, 2021, refinancing date.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class A-R, B-R, C-R, and D-R notes were issued
at a lower spread over three-month LIBOR than the original notes.
-- The replacement class E-R notes were issued at a higher spread
over three-month LIBOR than the original notes.
-- The new class F-R notes were issued at a floating spread.
-- The new class X notes were issued in connection with this
refinancing. These notes are expected to be paid down using
interest proceeds during the first 20 payment dates beginning with
the payment date in October 2021.
-- The stated maturity was extended by 3.25 years, and the
reinvestment period was extended by 2.25 years.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
S&P Global Ratings believes there remains high, albeit moderating,
uncertainty about the evolution of the coronavirus pandemic and its
economic effects. Vaccine production is ramping up and rollouts are
gathering pace around the world. Widespread immunization, which
will help pave the way for a return to more normal levels of social
and economic activity, looks to be achievable by most developed
economies by the end of the third quarter. However, some emerging
markets may only be able to achieve widespread immunization by
year-end or later. S&P said, "We use these assumptions about
vaccine timing in assessing the economic and credit implications
associated with the pandemic. As the situation evolves, we will
update our assumptions and estimates accordingly."
Ratings Assigned
Wind River 2019-1 CLO Ltd. /Wind River 2019-1 CLO LLC
Class X, $5.00 million: AAA (sf)
Class A-R, $300.00 million: AAA (sf)
Class B-R, $75.00 million: AA (sf)
Class C-R, $35.00 million: A (sf)
Class D-R, $30.00 million: BBB- (sf)
Class E-R, $18.75 million: BB- (sf)
Class F-R, $3.00 million: B- (sf)
Subordinated notes, $47.40 million: Not rated
Ratings Withdrawn
Wind River 2019-1 CLO Ltd. /Wind River 2019-1 CLO LLC
Class A-1 to not rated from 'AAA (sf)'
Class B to not rated from 'AA (sf)'
Class C to not rated from 'A (sf)'
Class D to not rated from 'BBB- (sf)'
Class E to not rated from 'BB- (sf)'
Z CAPITAL 2021-1: Moody's Assigns Ba3 Rating to Class E Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to nine classes of
notes issued by Z Capital Credit Partners CLO 2021-1 Ltd. (the
"Issuer" or "Z Capital 2021-1").
Moody's rating action is as follows:
US$150,000,000 Class A-1A Senior Secured Floating Rate Notes due
2033, Definitive Rating Assigned Aaa (sf)
US$15,000,000 Class A-1F Senior Secured Fixed Rate Notes due 2033,
Definitive Rating Assigned Aaa (sf)
US$20,000,000 Class A-2A Senior Secured Floating Rate Notes due
2033, Definitive Rating Assigned Aaa (sf)
US$15,000,000 Class B-1A Senior Secured Floating Rate Notes due
2033, Definitive Rating Assigned Aa2 (sf)
US$15,000,000 Class B-1F Senior Secured Fixed Rate Notes due 2033,
Definitive Rating Assigned Aa2 (sf)
US$16,500,000 Class C-1A Secured Deferrable Floating Rate Notes due
2033, Definitive Rating Assigned A2 (sf)
US$5,000,000 Class C-1F Secured Deferrable Fixed Rate Notes due
2033, Definitive Rating Assigned A2 (sf)
US$28,500,000 Class D Secured Deferrable Floating Rate Notes due
2033, Definitive Rating Assigned Baa3 (sf)
US$21,500,000 Class E Secured Deferrable Floating Rate Notes due
2033, Definitive Rating Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Z Capital 2021-1 is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated senior secured
corporate loans. At least 88.75% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 11.25% of the portfolio may consist of second lien loans
and unsecured loans. The portfolio is approximately 44% ramped as
of the closing date.
Z Capital CLO Management, L.L.C. (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's four year
reinvestment period. Thereafter, the manager may not reinvest and
all proceeds received will be used to amortize the notes in
sequential order.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $330,000,000
Diversity Score: 47
Weighted Average Rating Factor (WARF): 3700
Weighted Average Spread (WAS): 4.80%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 44.0%
Weighted Average Life (WAL): 8 years
The coronavirus pandemic has had a significant impact on economic
activity. Although global economies have shown a remarkable degree
of resilience to date and are returning to growth, the uneven
effects on individual businesses, sectors and regions will continue
throughout 2021 and will endure as a challenge to the world's
economies well beyond the end of the year. While persistent virus
fears remain the main risk for a recovery in demand, the economy
will recover faster if vaccines and further fiscal and monetary
policy responses bring forward a normalization of activity. As a
result, there is a heightened degree of uncertainty around Moody's
forecasts. Moody's analysis has considered the effect on the
performance of corporate assets from a gradual and unbalanced
recovery in U.S. economic activity.
Moody's regard the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
[*] S&P Takes Various Actions on 24 Classes from Six CLO Deals
--------------------------------------------------------------
S&P Global Ratings took various rating actions on 24 classes of
notes from six U.S. cash flow CLO transactions. The affected
ratings include 12 that were placed on CreditWatch with positive
implications on April 16, 2021, following paydowns to the senior
notes. S&P raised these 12 ratings and removed them from
CreditWatch. Of the remaining 12 ratings, which were not on
CreditWatch, it affirmed 8, raised 3, and lowered one.
A list of Affected Ratings can be viewed at:
https://bit.ly/3js3ICR
The six transactions in this review had at least one tranche that
was previously on CreditWatch positive following an increase in
their credit support, primarily due to paydowns. The rating actions
resolve these CreditWatch placements.
All six CLOs have exited their reinvestment period and are paying
down the notes in the order specified in their respective
documents. CLOs in their amortization phase possess dynamics that
can affect the analysis, such as paydowns that can boost the credit
support to the senior portion of the capital structure. However,
the benefit of this can be offset by increased concentration risk.
In some cases, S&P has seen upgrades for senior tranches and
downgrades for junior tranches within the same CLO. In some
instances, ratings were raised by multiple rating categories due to
the above-mentioned factors.
S&P said, "The rating actions follow the application of our global
corporate CLO criteria and our credit and cash flow analysis of
each transaction. Our analysis of the transactions entailed a
review of their performance, and the ratings list below highlights
key performance metrics behind specific rating changes.
"In line with our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and default scenarios. In addition, our analysis considered the
transactions ability to pay timely interest and/or ultimate
principal to each of our rated tranches. The results of the cash
flow analysis and other qualitative factors, as applicable,
demonstrated to us that all of the rated outstanding classes have
adequate credit enhancement available at the current rating levels
following the rating actions.
"While each tranche's indicative cash flow results were a primary
factor, we also incorporated various other considerations into our
decisions to raise, lower, affirm, or limit the ratings when
reviewing the indicative ratings suggested by our projected cash
flows." Some of these considerations included:
-- Forward-looking scenarios for 'CCC' and 'CCC-' rated
collateral, and for collateral with stressed market values;
-- Existing subordination or overcollateralization and recent
trends;
-- The cushion available for coverage ratios and comparative
analysis with other CLO tranches with similar ratings;
-- Current concentration levels;
-- The risk of imminent default; and
-- Additional sensitivity runs to account for any of the above.
S&P said, "Our ratings on some classes were constrained by the
application of the largest-obligor default test, a supplemental
stress test included as part of our corporate CLO criteria. The
test is intended to address event and model risks that might be
present in rated transactions."
The primary reason for the upgrades is paydowns to the senior
tranches and the resulting increase in credit support. The single
downgrade primarily reflects the cash flow results and supplemental
test, but also incorporates some of the forward-looking and
qualitative considerations mentioned above. S&P said, "Ratings
lowered to or affirmed at the 'CCC' rating category reflect our
view that, based on forward-looking analysis of existing 'CCC'
and/or 'CCC-' exposure, the previous credit enhancement has
deteriorated (or is likely to deteriorate) such that the class is
vulnerable and dependent on favorable market conditions. Such
market conditions undergo analysis in accordance with "Criteria For
Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," published Jan.
18, 2018."
S&P said, "The affirmations indicate our view that the current
credit enhancement available to those classes is still commensurate
with the current ratings.
"We will continue to review whether the ratings assigned to the
notes remain consistent with the credit enhancement available to
support them and take further rating actions as we deem
necessary."
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
TCR subscribers have free access to our on-line news archive.
Point your Web browser to http://TCRresources.bankrupt.com/and use
the e-mail address to which your TCR is delivered to login.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine
Tumanda, Valerie Udtuhan, Howard C. Tolentino, Carmel Paderog,
Meriam Fernandez, Joel Anthony G. Lopez, Cecil R. Villacampa,
Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo
Fernandez, Christopher G. Patalinghug, and Peter A. Chapman,
Editors.
Copyright 2021. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $975 for 6 months delivered via
e-mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Peter A.
Chapman at 215-945-7000.
*** End of Transmission ***