DBRS Finalizes Provisional Ratings on WinWater Mortgage Loan Trust 2014-3

DBRS, Inc. (DBRS) has today finalized the following provisional ratings on the Mortgage Pass-Through Certificates, Series 2014-3 (the Certificates) issued by WinWater Mortgage Loan Trust 2014-3 (the Trust):

-- $201.9 million Class A-1 at AAA (sf)
-- $192.8 million Class A-2 at AAA (sf)
-- $201.9 million Class A-3 at AAA (sf)
-- $192.8 million Class A-4 at AAA (sf)
-- $144.6 million Class A-5 at AAA (sf)
-- $154.3 million Class A-6 at AAA (sf)
-- $144.6 million Class A-7 at AAA (sf)
-- $154.3 million Class A-8 at AAA (sf)
-- $9.6 million Class A-9 at AAA (sf)
-- $9.6 million Class A-10 at AAA (sf)
-- $38.6 million Class A-11 at AAA (sf)
-- $48.2 million Class A-12 at AAA (sf)
-- $9.1 million Class A-13 at AAA (sf)
-- $9.1 million Class A-14 at AAA (sf)
-- $40.0 million Class A-15 at AAA (sf)
-- $241.9 million Class A-X-1 at AAA (sf)
-- $144.6 million Class A-X-2 at AAA (sf)
-- $9.6 million Class A-X-3 at AAA (sf)
-- $192.8 million Class A-X-4 at AAA (sf)
-- $9.1 million Class A-X-5 at AAA (sf)
-- $40.0 million Class A-X-6 at AAA (sf)
-- $241.9 million Class A-X-7 at AAA (sf)
-- $241.9 million Class A-X-8 at AAA (sf)
-- $1.6 million Class B-1 at AA (sf)
-- $4.9 million Class B-2 at A (sf)
-- $7.1 million Class B-3 at BBB (sf)
-- $3.7 million Class B-4 at BB (sf)

In addition, DBRS has today assigned the following new ratings on the Certificates issued by the Trust:

-- $146.6 million Class A-X-9 at AAA (sf)

Classes A-X-1, A-X-2, A-X-3, A-X-4, A-X-5, A-X-6, A-X-7, A-X-8 and A-X-9 are interest-only certificates. The class balances represent notional amounts.

Classes A-1, A-2, A-3, A-4, A-5, A-6, A-8, A-9, A-12, A-14, A-X-7, A-X-8 and A-X-9 are exchangeable certificates. These classes can be exchanged for combinations of exchange certificates as specified in the offering documents.

Classes A-2, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11 and A-12 are super senior certificates. These classes benefit from additional protection from senior support certificates (Classes A-13 and A-14) with respect to loss allocation.

The AAA (sf) ratings in this transaction reflect the 8.25% of credit enhancement provided by subordination. The AA (sf), A (sf), BBB (sf) and BB (sf) ratings reflect 7.65%, 5.80%, 3.10% and 1.70% of credit enhancement, respectively. Other than the specified classes above, DBRS does not rate any other classes in this transaction.

The Certificates are backed by 356 loans with a total principal balance of $276,678,317 as of the Cut-Off Date. The mortgage loans were acquired by WinWater Acquisition Trust III, WinWater Acquisition Trust BA2, WinWater Acquisition Trust WF-1 and WinWater Acquisition Trust CS-1 (collectively, the WinWater Acquisition Trusts) either directly from an originator or through a third-party loan aggregator. The Sponsor, WinWater Home Mortgage, LLC, established the WinWater Acquisition Trusts to aggregate and acquire certain mortgage loans on behalf of the Sponsor.

The originators for the mortgage pool are Prospect Mortgage, LLC (11.2%), Ditech Mortgage Corp (10.1%), Skyline Financial Corp (6.2%), Parkside Lending, LLC (6.0%) and various other originators, each comprising less than 5% of the mortgage loans. FirstKey Mortgage, LLC (FirstKey) acquired 11.4% of the mortgage loans in the pool from various originators or sellers and subsequently sold them to WinWater Acquisition Trust WF-1.

The loans will be serviced by Cenlar FSB (Cenlar, 99.3%) and EverBank (0.7%). Wells Fargo Bank, N.A. will act as the Master Servicer, Securities Administrator and Custodian. Wilmington Trust, National Association will serve as Trustee. WinWater Residential Acquisition Corp. will act as the Servicing Administrator with respect to the loans serviced by Cenlar. The transaction employs a senior-subordinate shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

Each originator or FirstKey, with respect to the FirstKey-purchased loans (other than mortgage loans originated by EverBank), has made certain representations and warranties concerning the mortgage loans. The enforcement mechanism for breaches of representations includes automatic breach reviews by a third-party reviewer for any seriously delinquent loans, and resolution of disputes is ultimately subject to determination in an arbitration proceeding.

DBRS views the representations and warranties features for this transaction to be consistent with recent DBRS-rated prime jumbo transactions; however, some originators may potentially experience financial stress that could result in their inability to fulfill repurchase obligations, and the backstop to fulfill some of the obligations is being provided by an unrated entity (the Seller). To capture the above perceived weakness, DBRS adjusted the originator scores of the lenders in the portfolio downward. Such an adjustment (and consequent increases in default and loss rates) is to account for the originators’, FirstKey’s or the Seller’s potential inability to fulfill repurchase obligations. The full description of the representations and warranties standard, the mitigating factors and the DBRS analysis are detailed in the related rating report.

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

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link or by contacting us at info@dbrs.com.

These ratings are endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are RMBS Insight 1.2: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (March 2014), Unified Interest Rate Model for U.S. RMBS Transactions (January 2013), Third-Party Due Diligence Criteria for U.S. RMBS Transactions (September 2014), Representations and Warranties Criteria for U.S. RMBS Transactions (May 2014) and Legal Criteria for U.S. Structured Finance (July 2014), which can be found on our website under Methodologies.