DBRS Assigns Provisional Ratings to New Residential Mortgage Loan Trust 2017-3

DBRS, Inc. (DBRS) has today assigned the following provisional ratings to the Mortgage-Backed Notes, Series 2017-3 (the Notes) issued by New Residential Mortgage Loan Trust 2017-3 (the Trust):

-- $568.3 million Class A-1 at AAA (sf)
-- $568.3 million Class A-IO at AAA (sf)
-- $568.3 million Class A-1A at AAA (sf)
-- $568.3 million Class A-1B at AAA (sf)
-- $568.3 million Class A-1C at AAA (sf)
-- $568.3 million Class A1-IOA at AAA (sf)
-- $568.3 million Class A1-IOB at AAA (sf)
-- $568.3 million Class A1-IOC at AAA (sf)
-- $599.0 million Class A-2 at AA (sf)
-- $568.3 million Class A at AAA (sf)
-- $30.7 million Class B-1 at AA (sf)
-- $30.7 million Class B1-IO at AA (sf)
-- $30.7 million Class B-1A at AA (sf)
-- $30.7 million Class B-1B at AA (sf)
-- $30.7 million Class B-1C at AA (sf)
-- $30.7 million Class B1-IOA at AA (sf)
-- $30.7 million Class B1-IOB at AA (sf)
-- $30.7 million Class B1-IOC at AA (sf)
-- $20.9 million Class B-2 at A (sf)
-- $20.9 million Class B2-IO at A (sf)
-- $20.9 million Class B-2A at A (sf)
-- $20.9 million Class B-2B at A (sf)
-- $20.9 million Class B-2C at A (sf)
-- $20.9 million Class B2-IOA at A (sf)
-- $20.9 million Class B2-IOB at A (sf)
-- $20.9 million Class B2-IOC at A (sf)
-- $24.1 million Class B-3 at BBB (sf)
-- $24.1 million Class B-3A at BBB (sf)
-- $24.1 million Class B-3B at BBB (sf)
-- $24.1 million Class B-3C at BBB (sf)
-- $24.1 million Class B3-IOA at BBB (sf)
-- $24.1 million Class B3-IOB at BBB (sf)
-- $24.1 million Class B3-IOC at BBB (sf)
-- $14.0 million Class B-4 at BB (sf)
-- $14.0 million Class B-4A at BB (sf)
-- $14.0 million Class B4-IOA at BB (sf)
-- $14.0 million Class B-4B at BB (sf)
-- $14.0 million Class B4-IOB at BB (sf)
-- $14.0 million Class B-4C at BB (sf)
-- $14.0 million Class B4-IOC at BB (sf)
-- $12.9 million Class B-5 at B (sf)
-- $12.9 million Class B-5A at B (sf)
-- $12.9 million Class B5-IOA at B (sf)
-- $12.9 million Class B-5B at B (sf)
-- $12.9 million Class B5-IOB at B (sf)
-- $12.9 million Class B-5C at B (sf)
-- $12.9 million Class B5-IOC at B (sf)
-- $12.9 million Class B-5D at B (sf)
-- $12.9 million Class B5-IOD 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, B4-IOB, B4-IOC, B5-IOA, B5-IOB, B5-IOC and B5-IOD 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-4B, B4-IOB, B-4C, B4-IOC, B-5A, B5-IOA, B-5B, B5-IOB, B-5C, B5-IOC, B-5D and B5-IOD 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 18.60% of credit enhancement provided by subordinated Notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 14.20%, 11.20%, 7.75%, 5.75% and 3.90% 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 6,551 loans with a total principal balance of $698,108,121 as of the Cut-Off Date (May 1, 2017).

The loans are significantly seasoned with a weighted-average age of 161 months. As of the Cut-Off Date, 91.2% of the pool is current, 7.6% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method and 1.2% is in bankruptcy (all bankruptcy loans are performing or 30 days delinquent). Approximately 70.3% and 77.2% of the mortgage loans have been zero times 30 days delinquent (0 x 30) for the past 24 months and 12 months, respectively, under the MBA delinquency method. The portfolio contains 30.0% modified loans. The modifications happened more than two years ago for 65.5% of the modified loans. 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.

The Seller, NRZ Sponsor VI LLC (NRZ), acquired certain loans prior to the Closing Date and will acquire certain loans on the Closing Date in connection with the termination of various securitization trusts or through a whole loan purchase. Upon acquiring the loans from the securitization trusts, NRZ, through an affiliate, New Residential Funding 2017-3 LLC (the Depositor), will contribute the loans to the Trust. As the Sponsor, New Residential Investment Corp., through a majority-owned affiliate, will acquire and retain a 5% eligible vertical interest in each class of securities to be issued (other than the residual notes) 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, 58.3% of the pool is serviced by Ocwen Loan Servicing, LLC, 21.6% by Specialized Loan Servicing LLC and 20.1% by Nationstar Mortgage LLC (Nationstar). Nationstar will also act as the Master Servicer and the Special Servicer.

Beginning on September 1, 2017, the Seller will have the option to repurchase any loan that becomes 60 or more days delinquent under the MBA method at a price equal to the principal balance of the loan (Optional Repurchase Price), provided that such repurchases will be limited to 10% of the principal balance of the mortgage loans as of the Cut-Off Date.

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 LTV 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, title/lien, payment history and data integrity. Updated Home Data Index and/or broker price opinions were provided for the pool; however, a reconciliation was not performed the 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 1.3: 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.