DBRS Finalizes Provisional Ratings on New Residential Mortgage Loan Trust 2017-1

DBRS, Inc. (DBRS) has today finalized the following provisional ratings on the Mortgage-Backed Notes, Series 2017-1 (the Notes) issued by New Residential Mortgage Loan Trust 2017-1 (the Trust):

-- $635.2 million Class A-1 at AAA (sf)
-- $635.2 million Class A-IO at AAA (sf)
-- $635.2 million Class A at AAA (sf)
-- $26.1 million Class B-1 at AA (sf)
-- $26.1 million Class B1-IO at AA (sf)
-- $23.1 million Class B-2 at A (sf)
-- $23.1 million Class B2-IO at A (sf)
-- $18.9 million Class B-3 at BBB (sf)
-- $15.9 million Class B-4 at BB (sf)
-- $14.8 million Class B-5 at B (sf)

In addition, DBRS has assigned new ratings to the following Notes issued by the Trust:

-- $635.2 million Class A-1A at AAA (sf)
-- $635.2 million Class A-1B at AAA (sf)
-- $635.2 million Class A-1C at AAA (sf)
-- $635.2 million Class A1-IOA at AAA (sf)
-- $635.2 million Class A1-IOB at AAA (sf)
-- $635.2 million Class A1-IOC at AAA (sf)
-- $661.4 million Class A-2 at AA (sf)
-- $26.1 million Class B-1A at AA (sf)
-- $26.1 million Class B-1B at AA (sf)
-- $26.1 million Class B-1C at AA (sf)
-- $26.1 million Class B1-IOA at AA (sf)
-- $26.1 million Class B1-IOB at AA (sf)
-- $26.1 million Class B1-IOC at AA (sf)
-- $23.1 million Class B-2A at A (sf)
-- $23.1 million Class B-2B at A (sf)
-- $23.1 million Class B-2C at A (sf)
-- $23.1 million Class B2-IOA at A (sf)
-- $23.1 million Class B2-IOB at A (sf)
-- $23.1 million Class B2-IOC at A (sf)
-- $18.9 million Class B-3A at BBB (sf)
-- $18.9 million Class B-3B at BBB (sf)
-- $18.9 million Class B-3C at BBB (sf)
-- $18.9 million Class B3-IOA at BBB (sf)
-- $18.9 million Class B3-IOB at BBB (sf)
-- $18.9 million Class B3-IOC at BBB (sf)
-- $15.9 million Class B-4A at BB (sf)
-- $15.9 million Class B4-IOA at BB (sf)
-- $14.8 million Class B-5A at B (sf)
-- $14.8 million Class B5-IOA at B (sf)

Classes A-IO, A1-IOA, A1-IOB, A1-IOC, B1-IO, B1-IOA, B1-IOB, B1-IOC, B2-IO, B2-IOA, B2-IOB, B2-IOC, B3-IOA, B3-IOB, B3-IOC, B4-IOA and B5-IOA are interest-only notes. The class balances represent notional amounts.

Classes A-1A, A-1B, A-1C, A1-IOA, A1-IOB, A1-IOC, A-2, A, B-1A, B-1B, B-1C, B1-IOA, B1-IOB, B1-IOC, B-2A, B-2B, B-2C, B2-IOA, B2-IOB, B2-IOC, B-3A, B-3B, B-3C, B3-IOA, B3-IOB, B3-IOC, B-4A, B4-IOA, B-5A and B5-IOA are exchangeable notes. These classes can be exchanged for combinations of initial exchangeable notes as specified in the offering documents.

The AAA (sf) ratings on the Notes reflect the 16.05% of credit enhancement provided by subordinated notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 12.60%, 9.55%, 7.05%, 4.95% and 3.00% of credit enhancement, respectively.

Other than the specified classes above, DBRS does not rate any other class in this transaction.

This transaction is a securitization of a portfolio of seasoned performing and re-performing first-lien residential mortgages. The Notes are backed by 6,544 loans with a total principal balance of $756,694,458 as of the Cut-Off Date (February 1, 2017).

The loans are significantly seasoned with a weighted-average age of 161 months. As of the Cut-Off Date, 94.0% of the pool is current, 5.0% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method and 1.0% is in bankruptcy (all bankruptcy loans are performing or 30 days delinquent). Approximately 76.5% and 83.8% of the mortgage loans have been zero times 30 days delinquent for the past 24 months and 12 months, respectively, under the MBA delinquency method. Modified loans constitute 25.1% of the portfolio. The modifications happened more than two years ago for 71.1% of the modified loans. Because of the seasoning of the collateral, none of the loans are subject to the Consumer Financial Protection Bureau Ability-to-Repay/Qualified Mortgage rules.

The Seller, NRZ Sponsor V LLC (NRZ), will acquire the loans on or prior to the Closing Date in connection with the termination of various securitization trusts that had acquired the mortgage loans from various underlying sellers. Upon acquiring the loans from the securitization trusts, NRZ, through an affiliate, New Residential Funding 2017-1 LLC (the Depositor), will contribute loans to the Trust. As the Sponsor, New Residential Investment Corp., through a majority-owned affiliate, will acquire and retain a 5.0% eligible vertical interest in each class of securities to be issued (other than the residual certificates) to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder. These loans were originated and previously serviced by various entities through purchases in the secondary market.

As of the Cut-Off Date, 61.1% of the pool is serviced by Ocwen Loan Servicing, LLC and 38.9% by Nationstar Mortgage LLC (Nationstar). Nationstar will also act as the Master Servicer and the Special Servicer.

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 underlying assets that have significant seasoning, relatively clean payment histories and robust loan attributes with respect to credit scores, product types and loan-to-value ratios. Additionally, historical NRMLT securitizations have exhibited fast voluntary prepayment rates and satisfactory deal performance.

The transaction employs a relatively weak representations and warranties framework that includes an unrated representation provider (NRZ), certain knowledge qualifiers and fewer mortgage loan representations relative to DBRS criteria for seasoned pools.

Satisfactory third-party due diligence was performed on the pool for regulatory compliance and title/lien but was limited with respect to payment history, data integrity and servicing comments. Updated Home Data Index and/or broker price opinions were provided for the pool; however, a reconciliation was not performed on the majority of updated values.

Certain loans have missing assignments or endorsements as of the Closing Date. Given the relatively clean performance history of the mortgages and the operational capability of the servicers, DBRS believes the risk of impeding or delaying foreclosure is remote.

The full description of the strengths, challenges and mitigating factors are detailed in the related report. Please see the related appendix for additional information regarding sensitivity of assumptions used in the rating process.

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

The principal methodologies are RMBS Insight 1.2: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, Unified Interest Rate Model for Rating U.S. Structured Finance Transactions, Third-Party Due Diligence Criteria for U.S. RMBS Transactions, Representations and Warranties Criteria for U.S. RMBS Transactions, Legal Criteria for U.S. Structured Finance, Operational Risk Assessment for U.S. RMBS Originators and Operational Risk Assessment for U.S. RMBS Servicers, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

The full report providing additional analytical detail is available by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.