DBRS Assigns Provisional Ratings to Shellpoint Co-Originator Trust 2015-1

DBRS, Inc. (DBRS) has today assigned the following provisional ratings to the Mortgage Pass-Through Certificates, Series 2015-1 (the Certificates) issued by Shellpoint Co-Originator Trust 2015-1 (the Trust):

-- $246.9 million Class A-1 at AAA (sf)
-- $246.9 million Class A-2 at AAA (sf)
-- $228.9 million Class A-3 at AAA (sf)
-- $228.9 million Class A-4 at AAA (sf)
-- $171.7 million Class A-5 at AAA (sf)
-- $171.7 million Class A-6 at AAA (sf)
-- $57.2 million Class A-7 at AAA (sf)
-- $57.2 million Class A-8 at AAA (sf)
-- $183.1 million Class A-9 at AAA (sf)
-- $183.1 million Class A-10 at AAA (sf)
-- $45.8 million Class A-11 at AAA (sf)
-- $45.8 million Class A-12 at AAA (sf)
-- $11.4 million Class A-13 at AAA (sf)
-- $11.4 million Class A-14 at AAA (sf)
-- $18.0 million Class A-15 at AAA (sf)
-- $18.0 million Class A-16 at AAA (sf)
-- $171.7 million Class A-17 at AAA (sf)
-- $45.8 million Class A-18 at AAA (sf)
-- $11.4 million Class A-19 at AAA (sf)
-- $18.0 million Class A-20 at AAA (sf)
-- $246.9 million Class A-21 at AAA (sf)
-- $57.2 million Class A-22 at AAA (sf)
-- $228.9 million Class A-23 at AAA (sf)
-- $246.9 million Class A-X-1 at AAA (sf)
-- $246.9 million Class A-X-2 at AAA (sf)
-- $228.9 million Class A-X-3 at AAA (sf)
-- $171.7 million Class A-X-4 at AAA (sf)
-- $11.4 million Class A-X-5 at AAA (sf)
-- $45.8 million Class A-X-6 at AAA (sf)
-- $183.1 million Class A-X-7 at AAA (sf)
-- $57.2 million Class A-X-8 at AAA (sf)
-- $18.0 million Class A-X-9 at AAA (sf)
-- $171.7 million Class A-X-10 at AAA (sf)
-- $11.4 million Class A-X-11 at AAA (sf)
-- $45.8 million Class A-X-12 at AAA (sf)
-- $18.0 million Class A-X-13 at AAA (sf)
-- $246.9 million Class A-X-14 at AAA (sf)
-- $228.9 million Class A-X-15 at AAA (sf)
-- $171.7 million Class A-X-16 at AAA (sf)
-- $57.2 million Class A-X-17 at AAA (sf)
-- $11.4 million Class A-X-18 at AAA (sf)
-- $45.8 million Class A-X-19 at AAA (sf)
-- $18.0 million Class A-X-20 at AAA (sf)
-- $228.9 million Class A-X-21 at AAA (sf)
-- $246.9 million Class A-X-22 at AAA (sf)
-- $183.1 million Class A-X-23 at AAA (sf)
-- $4.7 million Class B-1 at AA (sf)
-- $4.4 million Class B-2 at A (sf)
-- $5.3 million Class B-3 at BBB (sf)
-- $3.9 million Class B-4 at BB (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, A-X-9, A-X-10, A-X-11, A-X-12, A-X-13, A-X-14, A-X-15, A-X-16, A-X-17, A-X-18, A-X-19, A-X-20, A-X-21, A-X-22 and A-X-23 are interest-only certificates. The class balances represent notional amounts.

Classes 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-17, A-18, A-19, A-22 and A-23 are super senior certificates. These classes benefit from additional protection from senior support certificates (Classes A-15, A-16 and A-20) with respect to loss allocation.

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-21, A-22, A-23, A-X-2, A-X-3, A-X-7, A-X-8, A-X-14, A-X-15, A-X-16, A-X-17, A-X-18, A-X-19, A-X-20, A-X-21, A-X-22 and A-X-23 are exchangeable certificates. These classes can be exchanged for combinations of initial exchangeable certificates as specified in the offering documents.

The AAA (sf) ratings in this transaction reflect the 8.30% of credit enhancement provided by subordination. The AA (sf), A (sf), BBB (sf) and BB (sf) ratings reflect 6.55%, 4.90%, 2.95% and 1.50% 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 318 loans with a total principal balance of $269,286,929 as of the Cut-Off Date (August 1, 2015). Approximately 52.1% of the mortgage loans were originated or acquired from originators through its flow correspondent program by New Penn Financial, LLC (New Penn or the Seller), a wholly owned subsidiary of Shellpoint Partners LLC (Shellpoint), and 47.9% were acquired by New Penn through a third-party loan aggregator. The remaining originators for the mortgage pool include PrimeLending, A Plainscapital Company (9.5%), Stonegate Mortgage Corporation (7.8%), Guild Mortgage Company (5.4%) and various other originators, each comprising less than 5.0% of the mortgage loans.

The loans will be serviced by New Penn Financial, LLC doing business as (d/b/a) Shellpoint Mortgage Servicing (SMS). 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. The transaction employs a senior-subordinate shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

Each originator or the Seller as applicable 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, modified loans, losses upon liquidation, as well as other review events as described in the related report. In addition, resolution of disputes is generally 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 or the Seller 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 some lenders in the portfolio downward. Such adjustment (and hence increases in default and loss rates) is to account for the originators’ 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 presale report.

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

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. Structured Finance 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.