DBRS Assigns Provisional Ratings to Bayview Opportunity Master Fund IVa Trust 2017-RT1

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following Mortgage-Backed Securities, Series 2017-RT1 (the Notes) issued by Bayview Opportunity Master Fund IVa Trust 2017-RT1 (the Trust):

-- $141.5 million Class A1 at AAA (sf)
-- $141.5 million Class A1-IO at AAA (sf)
-- $14.6 million Class B1 at AA (sf)
-- $10.4 million Class B2 at A (sf)
-- $10.4 million Class B3 at BBB (sf)
-- $8.3 million Class B4 at BB (sf)
-- $6.8 million Class B5 at B (sf)

The Class A1-IO notes are interest-only. The class balances represent notional amounts.

The AAA (sf) ratings on the Notes reflect the 32.00% of credit enhancement provided by subordinated Notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 25.00%, 20.00%, 15.00%, 11.00% and 7.75% 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 1,963 loans with a total interest-bearing principal balance of $208,130,128 as of the Cut-Off Date (March 31, 2017). The weighted-average current loan-to-value (LTV) ratio of the pool is 62.0%, suggesting considerable borrower equity in the mortgage properties.

The loans are approximately 135 months seasoned, and all are current as of the Cut-Off Date, including 1.8% bankruptcy-performing loans. Approximately 48.5% of the mortgage loans have been zero times 30 days delinquent (0x30) based on the interest paid-through date for the past 24 months under the Mortgage Bankers Association delinquency methods. Approximately 56.1% of the pool has remained 0x30 for the past 18 months and 67.3% for the past 12 months. Approximately 77.5% of the loans have been modified, 78.6% of which happened more than two years ago.

Within the pool, 517 mortgages have non-interest-bearing deferred amounts as of the Cut-Off date, which are not certificated into the rated notes, and any recoveries on these will instead be payable to the Class X Certificateholders.

The mortgage loans in this transaction were originated by various originators. The mortgage loans were initially acquired by an affiliate of BFA IVa Depositor, LLC (the depositor) from various third-party sellers, many of whom may not have originated or modified the mortgage loans sold by them. 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 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 transaction employs a sequential-pay cash flow structure. Principal proceeds can be used to cover interest shortfalls on the Notes, but the shortfalls on Class B2 and more subordinate bonds will not be paid until the more senior classes are retired.

The ratings reflect transactional strengths that include collateral with a relatively lower LTV ratio, an experienced servicer and comprehensive third-party diligence review. The due diligence was performed on the portfolio with respect to regulatory compliance (99.7%), 24-month payment history (100%), data integrity (100%) as well as title and lien review (98.9%). Updated broker price opinions (BPO) or exterior appraisals were provided for 99.2% of the pool, and a reconciliation was performed on approximately 21.5% of the BPOs. Servicing comments were reviewed for loans that did not have a perfect 12-month pay history prior to securitization.

The representations and warranties provided in this transaction generally conform to the representations and warranties that DBRS would expect to receive for an 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) a comprehensive third-party due diligence review; (2) a strong representations and warranties enforcement mechanism; and (3) that 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 ratings of A (sf), BBB (sf), BB (sf) and B (sf) address 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 presale 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 1.3: 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.