DBRS Assigns Provisional Ratings to Bayview Opportunity Master Fund IVb Trust 2017-RT6

DBRS, Inc. (DBRS) assigned provisional ratings to the Mortgage-Backed Securities, Series 2017-RT6 (the Notes) issued by Bayview Opportunity Master Fund IVb Trust 2017-RT6 as follows:

-- $112.1 million Class A at AAA (sf)
-- $112.1 million Class A-IOA at AAA (sf)
-- $112.1 million Class A-IOB at AAA (sf)

Classes A-IOA and A-IOB are interest-only Notes. The class balances represent notional amounts.

The AAA (sf) ratings on the Notes reflect the 34.15% of credit enhancement provided by 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 a portfolio of seasoned performing and re-performing first-lien residential mortgages. The Notes are backed by 2,745 loans with a total principal balance of $170,201,144 as of the Cut-Off Date (September 30, 2017).

The loans are approximately 131 months seasoned, and all are current as of the Cut-Off Date, including the 2.5% bankruptcy-performing loans. Approximately 57.8% of the mortgage loans have been zero times 30 days delinquent (0x30) for the past 24 months under the Mortgage Bankers Association delinquency methods. Approximately 60.3% of the pool has remained 0x30 for the past 18 months and 66.4% for the past 12 months. Approximately 55.2% of the loans have been modified, 79.9% of which happened more than two years ago.

Approximately 65.7% of the loans are daily simple interest loans. Within the pool, 1,298 mortgages have non-interest-bearing deferred amounts as of the Cut-Off Date, which equates to 3.6% of the total principal balance. Included in the deferred amounts are proprietary principal forgiveness and Home Affordable Modification Program principal reduction alternative amounts (collectively, PRA amounts), which comprise 0.2% of the total principal balance.

The loan-to-value (LTV) ratios are relatively stronger than other re-performing portfolios reviewed by DBRS. The weighted-average current LTV ratio of the pool is 66.9%, suggesting considerable borrower equity for some of the mortgage properties in the pool.

The mortgage loans in this transaction were originated by various originators. The mortgage loans were initially acquired by an affiliate of BFA IVb 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 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. Updated property values were provided for 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 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 IVb 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) a third-party due diligence review; (3) a relatively strong representations and warranties enforcement mechanism, including third-party reviews for breaches of representations and warranties; 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.

Within the mortgage pool, there are certain properties that are located in areas that may have been affected by Hurricane Harvey or Hurricane Irma. The Servicer intends to inspect properties in the affected zip codes for Hurricane Harvey and Hurricane Irma to assess whether any property was damaged on or prior to the Closing Date. If any property comes back as materially damaged, post Closing Date, the Sponsor intends to repurchase the loan from the security for breach of the property damage representation. Nonetheless, DBRS ran additional scenario analyses to stress these loans and test that the rated bonds can withstand further property value declines.

The DBRS ratings of AAA (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 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 the 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, Assessing U.S. RMBS Pools Under the Ability-to-Repay Rules, 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.