DBRS Assigns Provisional Ratings to New Residential Mortgage Loan Trust 2018-1

DBRS, Inc. (DBRS) assigned the following provisional ratings to the Mortgage-Backed Notes, Series 2018-1 (the Notes) issued by New Residential Mortgage Loan Trust 2018-1 (NRMLT or the Trust):

-- $546.4 million Class A-1 at AAA (sf)
-- $546.4 million Class A-IO at AAA (sf)
-- $546.4 million Class A-1A at AAA (sf)
-- $546.4 million Class A-1B at AAA (sf)
-- $546.4 million Class A-1C at AAA (sf)
-- $546.4 million Class A1-IOA at AAA (sf)
-- $546.4 million Class A1-IOB at AAA (sf)
-- $546.4 million Class A1-IOC at AAA (sf)
-- $581.6 million Class A-2 at AA (sf)
-- $546.4 million Class A at AAA (sf)
-- $35.2 million Class B-1 at AA (sf)
-- $35.2 million Class B1-IO at AA (sf)
-- $35.2 million Class B-1A at AA (sf)
-- $35.2 million Class B-1B at AA (sf)
-- $35.2 million Class B-1C at AA (sf)
-- $35.2 million Class B-1D at AA (sf)
-- $35.2 million Class B1-IOA at AA (sf)
-- $35.2 million Class B1-IOB at AA (sf)
-- $35.2 million Class B1-IOC at AA (sf)
-- $29.0 million Class B-2 at A (sf)
-- $29.0 million Class B2-IO at A (sf)
-- $29.0 million Class B-2A at A (sf)
-- $29.0 million Class B-2B at A (sf)
-- $29.0 million Class B-2C at A (sf)
-- $29.0 million Class B-2D at A (sf)
-- $29.0 million Class B2-IOA at A (sf)
-- $29.0 million Class B2-IOB at A (sf)
-- $29.0 million Class B2-IOC at A (sf)
-- $27.9 million Class B-3 at BBB (sf)
-- $27.9 million Class B3-IO at BBB (sf)
-- $27.9 million Class B-3A at BBB (sf)
-- $27.9 million Class B-3B at BBB (sf)
-- $27.9 million Class B-3C at BBB (sf)
-- $27.9 million Class B-3D at BBB (sf)
-- $27.9 million Class B3-IOA at BBB (sf)
-- $27.9 million Class B3-IOB at BBB (sf)
-- $27.9 million Class B3-IOC at BBB (sf)
-- $20.0 million Class B-4 at BB (sf)
-- $20.0 million Class B-4A at BB (sf)
-- $20.0 million Class B-4B at BB (sf)
-- $20.0 million Class B-4C at BB (sf)
-- $20.0 million Class B4-IOA at BB (sf)
-- $20.0 million Class B4-IOB at BB (sf)
-- $20.0 million Class B4-IOC at BB (sf)
-- $20.0 million Class B-5 at B (sf)
-- $20.0 million Class B-5A at B (sf)
-- $20.0 million Class B-5B at B (sf)
-- $20.0 million Class B-5C at B (sf)
-- $20.0 million Class B-5D at B (sf)
-- $20.0 million Class B5-IOA at B (sf)
-- $20.0 million Class B5-IOB at B (sf)
-- $20.0 million Class B5-IOC at B (sf)
-- $20.0 million Class B5-IOD at B (sf)
-- $39.9 million Class B-7 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-IO, 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, B-1D, B1-IOA, B1-IOB, B1-IOC, B-2A, B-2B, B-2C, B-2D, B2-IOA, B2-IOB, B2-IOC, B-3A, B-3B, B-3C, B-3D, B3-IOA, B3-IOB, B3-IOC, B-4A, B-4B, B-4C, B4-IOA, B4-IOB, B4-IOC, B-5A, B-5B, B-5C, B-5D, B5-IOA, B5-IOB, B5-IOC, B5-IOD and B-7 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 24.70% of credit enhancement provided by subordinated Notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 19.85%, 15.85%, 12.00%, 9.25% and 6.50% 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 8,110 loans with a total principal balance of $725,654,377 as of the Statistical Calculation Date (December 1, 2017). The class balances and mortgage loan statistics in this press release are based on the Statistical Calculation Date. The final class balances will be lower than those shown in the table above to reflect the aggregate stated principal balance of the mortgage loans as of the Cut-Off Date (January 1, 2018).

The loans are significantly seasoned with a weighted-average (WA) age of 174 months. As of the Statistical Calculation Date, 89.4% of the pool is current, 9.4% 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 61.6% and 70.7% 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 41.7% modified loans. The modifications happened more than two years ago for 75.6% 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 IX LLC (NRZ), acquired the loans prior to the Closing Date in connection with the termination of various securitization trusts. Upon acquiring the loans from the securitization trusts, NRZ, through an affiliate, New Residential Funding 2018-1 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 Statistical Calculation Date, 43.5% of the pool is serviced by Specialized Loan Servicing LLC (SLS), 34.9% by Ocwen Loan Servicing, LLC (Ocwen), 17.6% by Nationstar Mortgage LLC (Nationstar), 2.7% by Wells Fargo Bank (Wells Fargo) and 1.4% by PNC Mortgage (PNC). Nationstar will also act as the Master Servicer and the Special Servicer.

The Seller will have the option to repurchase any loan that becomes 60 or more days delinquent under the MBA method or any REO property acquired in respect of a mortgage loan 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.

Unlike other seasoned re-performing loan securitizations, the Servicers in this transaction will advance principal and interest on delinquent mortgages to the extent such advances are deemed recoverable. The transaction employs a senior-subordinate, shifting interest cash flow structure that is enhanced from a pre-crisis structure.

As of the Statistical Calculation Date, approximately 3.0%, 9.2% and 1.6% of the properties securing the loans in the pool are located in zip codes identified by the Federal Emergency Management Agency (FEMA), as affected by Hurricane Harvey, Hurricane Irma or California Wildfires, respectively. The seller will provide a representation and warranty that, to its knowledge, properties have no damage/condemnation that materially adversely affects the value of the property and is expected to repurchase loans which breach this representation. DBRS ran additional scenario analyses to stress the FEMA loans and test that the rated bonds can withstand further property value declines.

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 loan-to-value 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 on 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.

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.

Please see the related appendix for additional information regarding sensitivity of assumptions used in the rating process.

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.