DBRS Finalizes Provisional Ratings to FirstKey Mortgage Trust 2015-1

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the Mortgage Pass-Through Certificates, Series 2015-1 (the Certificates) issued by FirstKey Mortgage Trust 2015-1 (the Trust):

-- $266.8 million Class A-1 at AAA (sf)
-- $266.8 million Class A-X-1 at AAA (sf)
-- $266.8 million Class A-2 at AAA (sf)
-- $266.8 million Class A-X-2 at AAA (sf)
-- $266.8 million Class A-X-3 at AAA (sf)
-- $253.6 million Class A-3 at AAA (sf)
-- $253.6 million Class A-4 at AAA (sf)
-- $253.6 million Class A-X-4 at AAA (sf)
-- $13.2 million Class A-5 at AAA (sf)
-- $13.2 million Class A-6 at AAA (sf)
-- $13.2 million Class A-X-5 at AAA (sf)
-- $266.8 million Class A-7 at AAA (sf)
-- $190.2 million Class A-8 at AAA (sf)
-- $190.2 million Class A-9 at AAA (sf)
-- $190.2 million Class A-X-6 at AAA (sf)
-- $63.4 million Class A-10 at AAA (sf)
-- $63.4 million Class A-11 at AAA (sf)
-- $63.4 million Class A-X-7 at AAA (sf)

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

Classes A-1, A-2, A-3, A-4, A-5, A-7, A-8, A-10, A-X-2, A-X-3 and A-X-4 are exchangeable certificates. These classes can be exchanged for combinations of initial exchangeable certificates as specified in the offering documents.

Classes A-3, A-4, A-8, A-9, A-10 and A-11 are super senior certificates. These classes benefit from additional protection from senior support certificates (Class A-5 and Class A-6) with respect to loss allocation.

The AAA (sf) ratings in this transaction reflect the 8.95% of credit enhancement provided by subordination. Other than the specified classes above, DBRS does not rate any other classes in this transaction.

The Certificates are backed by 407 loans with a total principal balance of $293,015,861 as of the Cut-Off Date (February 1, 2015). The mortgage loans were acquired by FirstKey Mortgage, LLC (FirstKey or the Sponsor) either through its correspondent channel or through bulk loan purchases.

The originators for the mortgage pool are CMG Mortgage, Inc. (14.3%); Bridgeview Bancorp, Inc. (5.7%); Excel Mortgage Servicing, Inc. d/b/a Impac Mortgage Corporation (5.2%); and various other originators, each comprising less than 5.0% of the mortgage loans.

The loans will be serviced by Cenlar FSB. Wells Fargo Bank, N.A. (rated AA (high) and R-1 (high) with Stable trends by DBRS) will act as the Master Servicer, Securities Administrator and Custodian. Wilmington Savings Fund Society, FSB d/b/a Christiana Trust will serve as Trustee. FirstKey will act as the Servicing Administrator with respect to the Cenlar serviced loans. The transaction employs a senior-subordinate shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

The ratings reflect transactional strengths that include high-quality underlying assets, well-qualified borrowers and a satisfactory third-party due diligence review.

With respect to the representations and warranties framework, the Sponsor or EverBank (for the loans originated by EverBank) provides traditional lifetime representations and warranties to the Trust without any sunset provisions. The EverBank representations and warranties were as of the date such loans were sold to the entity from which FirstKey acquired the loans. FirstKey makes bring-down representations to the securitization closing date for these 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 generally subject to determination in an arbitration proceeding.

Unlike most prime jumbo conduit securitizations issued recently where the aggregators often provide representations and warranties backstop in the event of an originator’s bankruptcy or insolvency proceedings, this transaction relies solely on EverBank or FirstKey to honor representations and warranties, thus creating only a single layer of protection (as opposed to a double-layer framework often seen in recent conduit securitizations) against breaches of representations and warranties. To capture the above-perceived weakness, DBRS adjusted the originator scores of the mortgage loans in the portfolio downward. Such adjustment (and hence increases in default and loss rates) is to account for the 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, Unified Interest Rate Model for U.S. RMBS Transactions, Third-Party Due Diligence Criteria for U.S. RMBS Transactions, Representations and Warranties Criteria for U.S. RMBS Transactions and Legal Criteria for U.S. Structured Finance, which can be found on our website under Methodologies.