DBRS Finalizes Provisional Ratings on Bayview Opportunity Master Fund IVa Trust 2017-SPL1
RMBSDBRS, Inc. (DBRS) has today finalized provisional ratings on the following Mortgage-Backed Securities, Series 2017-SPL1 (the Notes) issued by Bayview Opportunity Master Fund IVa Trust 2017-SPL1 (the Trust):
-- $222.3 million Class A at AAA (sf)
-- $222.3 million Class A-IOA at AAA (sf)
-- $222.3 million Class A-IOB at AAA (sf)
-- $27.7 million Class B1 at AA (sf)
-- $27.7 million Class B1-IOA at AA (sf)
-- $27.7 million Class B1-IOB at AA (sf)
-- $12.7 million Class B2 at A (sf)
-- $12.7 million Class B2-IO at A (sf)
Classes A-IOA, A-IOB, B1-IOA, B1-IOB and B2-IO are interest-only notes. The class balances represent notional amounts.
The AAA (sf) ratings on the Notes reflect the 36.10% of credit enhancement provided by subordinated Notes in the pool. The AA (sf) and A (sf) ratings reflect 28.15% and 24.50% of credit enhancement, respectively.
Other than the specified classes above, DBRS does not rate any other classes 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 5,733 loans with a total interest-bearing principal balance of $347,937,530 as of the Cut-Off Date (February 28, 2017).
The portfolio comprises 92.6% daily simple interest loans and has an average original loan size of $76,654. The loans are approximately 124 months seasoned and all are current as of the Cut-Off Date, including 0.9% bankruptcy-performing loans. Approximately 91.6% of the mortgage loans have been zero times 30 days delinquent based on the interest paid through date for the past 36 months under the Mortgage Bankers Association delinquency methods. Approximately 39.5% of the loans have been modified, 99.9% of which happened more than two years ago. Within the pool, 2,992 mortgages have non-interest-bearing deferred amounts, which are not included in the principal balances of the mortgage loans and will instead be payable to the holders of the Class X Notes. As a result of the seasoning of the collateral, none of the loans are subject to the Consumer Financial Protection Bureau Ability-to-Repay/Qualified Mortgage rules.
An affiliate of BFA IVa Depositor, LLC (the Depositor) acquired the loans from CitiFinancial Credit Company and its lending subsidiaries during the period from March 2016 through December 2016, and subsequently transferred the loans to various transferring trusts owned by Bayview Opportunity Master Fund IVa L.P. (the Sponsor). On the Closing Date, the transferring trusts will assign the loans to the Depositor, who will contribute the loans to the Trust. The Sponsor will acquire and retain a 5% eligible vertical interest in each class of securities to be issued 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 CitiFinancial Credit Company. As of the Cut-Off Date, all of the loans are serviced by Bayview Loan Servicing, LLC.
There will not be any advancing of delinquent principal or interest on any mortgages by the servicer or any other party to the transaction; however, the servicer is obligated to make advances in respect of taxes and insurance, reasonable costs and expenses incurred in the course of servicing and disposing of properties.
The transaction employs a sequential-pay cash flow structure. Principal proceeds can be used to cover interest shortfalls on the Class A and Class B1 Notes (and the related interest-only bonds), but such shortfalls on more subordinate bonds will not be paid from principal. In addition, diverted interest from the mortgage loans will be used to pay down principal on the Notes sequentially.
The lack of principal and interest advances on delinquent mortgages may increase the possibility of periodic interest shortfalls to the Noteholders; however, principal proceeds used to pay interest to the Notes sequentially and subordination levels greater than expected losses may provide for timely payment of interest to the rated Notes.
The ratings reflect transactional strengths that include underlying assets that have generally performed well through the crisis, an experienced servicer and strong structural features. Additionally, a third-party due diligence review was performed on the portfolio with respect to regulatory compliance, payment history, data capture and title and lien review. Home Data Index values were provided for 99.7% of the mortgage loans and broker price opinions or 2055 appraisals were provided for approximately 60.6% of the mortgage loans.
The representations and warranties provided in this transaction generally conform to the representations and warranties that DBRS would expect to receive for a RMBS transaction with seasoned collateral; however, the transaction employs a representations and warranties framework that includes an unrated representation provider (Bayview Opportunity Master Fund IVa L.P.) with a backstop by an unrated entity (Bayview Asset Management, LLC) and certain knowledge qualifiers. Mitigating factors include (1) significant loan seasoning and relatively clean performance history in recent years; (2) third-party due diligence review; (3) a strong representations and warranties enforcement mechanism, including delinquency review trigger; and (4) for representations and warranties with knowledge qualifiers, even if the Sponsor did not have actual knowledge of the breach, the Remedy Provider is still required to remedy the breach in the same manner as if no knowledge qualifier had been made.
The enforcement mechanism for breaches of representations includes automatic breach reviews by a third-party reviewer for any seriously delinquent loans or any loans that incur loss upon liquidation. Resolution of disputes are ultimately subject to determination in an arbitration proceeding.
The DBRS ratings of AAA (sf) and AA (sf) address the timely payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the related Notes. The DBRS rating of A (sf) addresses the ultimate payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the related Notes.
The full description of the strengths, challenges and mitigating factors are detailed in the related report 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.
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