DBRS Assigns New Rating to CSMC 2017-FHA1 Trust

DBRS, Inc. (DBRS) has today assigned the following ratings to the Mortgage-Backed Notes, Series 2017-FHA1 (the Notes) issued by CSMC 2017-FHA1 Trust (the Trust):

-- $76.1 million Class A-1 at A (high) (sf)

The A (high) (sf) rating on the Notes reflects the 16.50% of credit enhancement provided by the subordinated Notes in the pool.

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

This transaction is a securitization of seasoned performing and re-performing residential mortgages funded by the issuance of mortgage-backed notes. The mortgages in the securitization are all insured by the Federal Housing Administration (FHA) of the United States Department of Housing and Urban Development. The Notes are backed by 672 loans with a total principal balance of $91,182,780 as of the Cut-Off Date.

The loans are approximately 127 months seasoned and all are either current (77.0%), 30 days to 59 days delinquent (17.9%) or in bankruptcy (5.1%) as of the Cut-Off Date. Approximately 72.6% of the loans that are in bankruptcy are current in their payment status. Approximately 29.8% 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 36.8% of the pool has remained 0x30 for the past 18 months and 46.2% for the past 12 months. Approximately 82.4% of the loans have been modified, 77.2% of which happened more than two years ago. Within the pool, four mortgages have non-interest-bearing deferred amounts as of the Cut-Off Date.

As of the Cut-Off Date, all of the loans are serviced by Select Portfolio Servicing, Inc.

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 Notes, but the shortfalls on the subordinate bonds will not be paid until the more senior classes are retired.

The ratings reflect transactional strengths that include lower loss severities as a result of FHA insurance, third-party diligence review and structural features. All the loans in the securitization have FHA insurance that generally covers 100% of the unpaid principal balance and a substantial portion of the interest and foreclosure expenses. The insurance is expected to significantly lower loss severities when compared to loans with similar attributes that are not insured. Further details on the FHA insurance can be found on the Key Loss Severity Drivers section in the related rating report. The due diligence for this transaction included regulatory compliance, title/lien review, tax review, pay-history review and data integrity. Updated valuations were obtained for all the loans in the transaction.

The transaction employs a relatively weak representations and warranties framework that includes a 12-month sunset, certain knowledge qualifiers, weak enforcement provisions and fewer mortgage loan representations relative to DBRS’s criteria for seasoned pools.

The DBRS rating of A (high) (sf) addresses 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 full description of the strengths, challenges and mitigating factors are detailed in the related rating 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.