DBRS Assigns Provisional Ratings to MetLife Securitization Trust 2017-1

DBRS, Inc. (DBRS) assigned the following provisional ratings to the Residential Mortgage-Backed Securities, Series 2017-1 (the Notes) issued by MetLife Securitization Trust 2017-1 (the Trust):

-- $288.9 million Class A at AAA (sf)
-- $12.0 million Class M1 at AA (sf)
-- $11.2 million Class M2 at A (sf)

The AAA (sf) ratings on the Notes reflect the 15.90% of credit enhancement provided by subordinated Notes in the pool. The AA (sf) and A (sf) ratings reflect credit enhancement of 12.40% and 9.15%, 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 1,378 loans with a total principal balance of $343,510,151 as of the Cut-Off Date (September 30, 2017).

The portfolio is approximately 128 months seasoned and contains 80.4% modified loans. The modifications happened more than two years ago for 97.7% of the modified loans. Within the pool, 210 mortgages have non-interest-bearing deferred amounts, which equates to 4.6% of the total principal balance.

All of the loans were current as of the Cut-Off Date, and all of the loans have been zero times 30 days delinquent (0 x 30) for at least the past 24 months under the Mortgage Bankers Association (MBA) delinquency method. None of the loans are subject to the Consumer Financial Protection Bureau’s Qualified Mortgage rules.

Prior to the Closing Date, Metropolitan Life Insurance Company (MetLife), in its capacity as the Sponsor and as the Seller acquired the loans from various unaffiliated third-party sellers. As the Sponsor, MetLife and/or more majority-owned affiliates of the Sponsor will collectively acquire and retain a 5% eligible vertical interest in each class of securities to be issued (other than the Class R certificates) to satisfy the credit risk retention requirements.

As of the Closing Date, the loans will be serviced by Select Portfolio Servicing, Inc. (SPS).

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 homeowner association fees, taxes and insurance, installment payments on energy improvement liens and 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 Securities, but such shortfalls on Class M2 and more subordinate bonds will not be paid until the more senior classes are retired.

As of the Cut-Off Date, certain loans may be secured by properties located in counties designated as disaster areas by the Federal Emergency Management Agency as a result of either Hurricane Harvey or Hurricane Irma. Additionally, certain loans may be secured by properties located in counties affected by the wildfires in California. The Servicer, in its normal course of business, is contacting borrowers to inquire about potential damages. If a borrower reports or the Servicer discovers damage to a property in such affected areas, the Servicer will order a property inspection to determine the extent of the damage and whether such damage occurred prior to the Closing Date. If the inspection report concludes that there was material damage prior to the Closing Date, the Seller will repurchase the related loan. The Seller is also providing a no-damage/condemnation loan-level representation and warranty. Nonetheless, DBRS ran additional scenario analyses to stress the potentially affected loans and test that the rated bonds can withstand further property value declines.

The ratings reflect transactional strengths that include underlying assets that generally performed well through the crisis, and a strong servicer oversight. Additionally, a satisfactory third-party due diligence review was performed on the portfolio with respect to regulatory compliance, payment history and data capture as well as title and tax review. Updated broker price opinions or exterior appraisals were provided for 100.0% of the pool; however, a reconciliation was not performed on the updated values.

The transaction employs a representations and warranties (R&Ws) framework that includes a trigger review event that may result in potential breaches of R&Ws being reviewed at a much later date, certain knowledge qualifiers and fewer mortgage loan representations relative to DBRS criteria for seasoned pools. Mitigating factors include (1) A financially strong counterparty, MetLife, is providing mortgage loan R&Ws for the life of the transaction; (2) significant loan seasoning and clean performance history in recent years; (3) a comprehensive due diligence review; (4) a relatively strong R&W enforcement mechanism, including directing noteholder review and binding arbitration; and (5) for R&Ws with knowledge qualifiers, even if the Seller did not have actual knowledge of the breach, the Seller is still required to remedy the breach in the same manner as if no knowledge qualifier had been made.

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 is 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, 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, Operational Risk Assessment for U.S. RMBS Originators, Operational Risk Assessment for U.S. RMBS Servicers and Legal Criteria for U.S. Structured Finance, 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.