DBRS Finalizes Provisional Ratings on CSMLT 2015-3 Trust

DBRS, Inc. (DBRS) has today finalized provisional ratings on the following Mortgage Pass-Through Certificates, Series 2015-3 (the Certificates) issued by CSMLT 2015-3 Trust:

-- $191.0 million Class 1-A-X-2 at AAA (sf)
-- $131.8 million Class 1-A-1 at AAA (sf)
-- $131.8 million Class 1-A-X-1 at AAA (sf)
-- $131.8 million Class 1-A-2 at AAA (sf)
-- $26.4 million Class 1-A-3 at AAA (sf)
-- $17.6 million Class 1-A-4 at AAA (sf)
-- $15.3 million Class 1-A-5 at AAA (sf)
-- $175.7 million Class 1-A-6 at AAA (sf)
-- $191.0 million Class 1-A-7 at AAA (sf)
-- $43.9 million Class 1-A-8 at AAA (sf)
-- $53.4 million Class 2-A-X-2 at AAA (sf)
-- $36.8 million Class 2-A-1 at AAA (sf)
-- $36.8 million Class 2-A-X-1 at AAA (sf)
-- $36.8 million Class 2-A-2 at AAA (sf)
-- $7.4 million Class 2-A-3 at AAA (sf)
-- $4.9 million Class 2-A-4 at AAA (sf)
-- $4.3 million Class 2-A-5 at AAA (sf)
-- $49.1 million Class 2-A-6 at AAA (sf)
-- $53.4 million Class 2-A-7 at AAA (sf)
-- $12.3 million Class 2-A-8 at AAA (sf)
-- $44.4 million Class 3-A-1 at AAA (sf)
-- $2.4 million Class 3-A-2 at AAA (sf)
-- $46.8 million Class 3-A-3 at AAA (sf)
-- $199.1 million Class IO-S-1 at A (sf)
-- $43.4 million Class IO-S-2 at A (sf)
-- $46.9 million Class IO-S-3 at A (sf)
-- $289.4 million Class A-IO-S at A (sf)

Classes 1-A-X-1, 1-A-X-2, 2-A-X-1 and 2-A-X-2 are interest-only certificates. The class balances represent notional amounts.
Classes IO-S-1, IO-S-2, IO-S-3 and A-IO-S certificates are excess servicing fee certificates. The class balances represent notional amounts.

Classes 1-A-2, 1-A-6, 1-A-7, 1-A-8, 2-A-2, 2-A-6, 2-A-7, 2-A-8, 3-A-3 and A-IO-S are exchangeable certificates. These classes can be exchanged for combinations of initial exchangeable certificates as specified in the offering documents.

Classes 1-A-1, 1-A-2, 1-A-3, 1-A-4, 1-A-6, 1-A-8, 2-A-1, 2-A-2, 2-A-3, 2-A-4, 2-A-6, 2-A-8 and 3-A-1 are super-senior certificates. These classes benefit from additional protection from senior support certificates (Classes 1-A-5, 2-A-5 and 3-A-2) with respect to loss allocation.

The AAA (sf) ratings in this transaction reflect the 7.60% 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 420 loans with a total principal balance of $315,140,564 as of the Cut-Off Date (November 1, 2015). The mortgage loans were acquired by DLJ Mortgage Capital, Inc. (DLJMC).

The loans are divided into three pools. Pool 1 and Pool 2 consist of 100% fixed-rate mortgages. Pool 1 contains loans generally with original terms to maturity of 30 years, while Pool 2 contains loans generally with original terms to maturity of 15 years. Pool 3 contains 100.0% hybrid adjustable-rate mortgages with initial fixed-rate periods of five years (54.9%), seven years (34.2%) and ten years (10.9%).

The originators for the Pool 1 mortgage loans are Amerihome Mortgage Company, LLC (12.7%), Stearns Lending, LLC (10.1%), Sierra Pacific Mortgage Company, Inc. (7.4%), Caliber Home Loans, Inc. (6.4%), Pinnacle Capital Mortgage LLC (Pinnacle, 6.2%), IMPAC Mortgage Corp. (IMPAC, 5.7%) and various other originators, each comprising less than 5.0% of Pool 1. The originators for the Pool 2 mortgage loans are Quicken Loans Inc. (23.4%), First Republic Bank (First Republic, 21.5%), FirstKey Mortgage, LLC (FirstKey, 10.2%) and various other originators, each comprising less than 5.0% of Pool 2. The originators for the Pool 3 mortgage loans are IMPAC (15.0%), FirstKey (8.9%), Pinnacle (8.5%), PHH Mortgage Corporation (PHH, 6.1%), Banc Home Loans (5.0%) and various other originators, each comprising less than 5.0% of Pool 3.

The Pool 1 loans will be serviced by Select Portfolio Servicing, Inc. (SPS, 96.3%), New Penn Financial, LLC doing business as Shellpoint Mortgage Servicing (SMS, 3.1%) and PHH (0.6%). The Pool 2 loans will be serviced by SPS (75.2%), First Republic (21.5%), PHH (2.6%) and SMS (0.8%). The Pool 3 loans will be serviced by SPS (92.5%), PHH (6.1%) and First Republic (1.4%). Wells Fargo Bank, N.A. will act as the Master Servicer and Securities Administrator. Deutsche Bank National Trust Company will act as Custodian.

The transaction employs a senior-subordinate shifting-interest cash flow structure that is enhanced from a pre-crisis structure. Pool 1, Pool 2 and Pool 3 senior certificates will be backed by collateral from each pool, respectively. The subordinate certificates will be cross-collateralized between the three pools.

Each originator 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 may be ultimately subject to determination in an arbitration proceeding. Certain loans also benefit from representations and warranties backstopped by the seller, DLJMC, a wholly owned subsidiary of Credit Suisse (USA), Inc., in the event of an originator’s bankruptcy or insolvency proceeding and if the originator fails to cure, repurchase or substitute such breach or loans. Such backstop is, however, subject to certain sunset provisions that give consideration to prior loan performance.

DBRS views the representations and warranties features for this transaction to be consistent with recent DBRS-rated CSMC prime jumbo transactions; however, the relatively weak financial strength of certain originators, coupled with the sunset provisions on the backstop by DLJMC, still demand additional penalties and credit enhancement protections. The full description of the representations and warranties standard, the mitigating factors and the DBRS analysis are detailed in the related 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, 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.