DBRS Assigns Provisional Ratings to New Residential Mortgage Loan Trust 2018-RPL1

DBRS, Inc. (DBRS) assigned the following provisional ratings to the Mortgage-Backed Notes, Series 2018-RPL1 (the Notes) issued by New Residential Mortgage Loan Trust 2018-RPL1 (NRMLT or the Trust):

-- $529.9 million Class A-1 at AAA (sf)
-- $30.2 million Class A-2 at AA (sf)
-- $28.8 million Class M-1 at A (sf)
-- $26.4 million Class M-2 at BBB (sf)
-- $26.0 million Class B-1 at BB (sf)
-- $21.5 million Class B-2 at B (sf)
-- $560.1 million Class A-3 at AA (sf)
-- $588.9 million Class A-4 at A (sf)

Classes A-3 and A-4 are exchangeable notes. These classes can be exchanged for combinations of exchange notes as specified in the offering documents.

The AAA (sf) rating on the Notes reflect the 23.65% of credit enhancement provided by subordinated Notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 19.30%, 15.15%, 11.35%, 7.60% and 4.50% 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 3,055 loans with a total principal balance of $694,018,973 as of the Cut-Off Date (April 30, 2018).

The portfolio is approximately 137 months seasoned and contains 99.4% modified loans. The modifications happened more than two years ago for 85.6% of the modified loans. Within the pool, 2,159 mortgages have non-interest-bearing deferred amounts, which equate to 6.5% of the total principal balance.

The majority of the loans in the pool (97.4%) are current as of the Cut-Off Date. Approximately 1.5% of the pool are 30 days delinquent and 1.1% are bankruptcy loans, which are either performing or 30 days delinquent. Approximately 91.2% of the mortgage loans have been zero times 30 days delinquent for at least the past 24 months under the Mortgage Bankers Association (MBA) delinquency method. 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 V LLC (NRZ), acquired the loans prior to the Closing Date and, through an affiliate, New Residential Funding 2018-RPL1 LLC (the Depositor), will contribute the loans to the Trust. As the Sponsor, New Residential Investment Corp., or a majority-owned affiliate, will acquire and retain a 5.0% eligible horizontal residual interest 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, the loans will be serviced by Nationstar Mortgage LLC (Nationstar Mortgage, 98.3%), Fay Servicing LLC (1.1%) and Select Portfolio Servicing, Inc. (0.5%). The servicing of 96.7% of the aggregate pool that are initially serviced by Nationstar Mortgage is scheduled to transfer to Shellpoint Mortgage Servicing (SMS) by July 2, 2018. SMS will also act as Special Servicer for any loan that becomes 60 days delinquent under the MBA method.

There will not be any advancing of delinquent principal or interest on any mortgages by the servicers or any other party to the transaction; however, the servicers are obligated to make advances with respect to the preservation, inspection, restoration, protection and repair of a mortgaged property, including delinquent tax and insurance payments, the enforcement or judicial proceedings associated with a mortgage loan and the management and liquidation of properties (to the extent such advances are deemed recoverable by the related servicer).

NRZ, as the Seller, will have the option to repurchase any loan that becomes 60 or more days delinquent under the MBA method or any real estate owned 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 10.0% of the principal balance of the mortgage loans as of the Cut-Off Date.

As a loss mitigation alternative, each Servicer has the right to sell (or cause to be sold) mortgage loans that become 60 or more days delinquent under the MBA method to any party in the secondary market in an arms-length transaction at fair market value to maximize proceeds on such loan on a present value basis.

The transaction employs a sequential-pay cash flow structure. Principal proceeds and excess interest can be used to cover interest shortfalls on the Notes, but such shortfalls on Class M-1 and more subordinate bonds will not be paid from principal proceeds until the more senior classes are retired.

The lack of principal and interest advances on delinquent mortgages may increase the possibility of periodic interest shortfalls to the Noteholders; however, principal proceeds can be used to pay interest to the Notes sequentially and subordination levels are greater than expected losses, which may provide for timely payment of interest to the rated Notes.

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, 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. Servicing comments were reviewed for a large sample of loans. Updated broker price opinions were provided for all the loans; however, a reconciliation was not performed on the updated values.

The transaction employs a relatively weak representations and warranties framework that includes a 12-month sunset, an unrated representation provider (NRZ), certain knowledge qualifiers and fewer mortgage loan representations relative to DBRS criteria for seasoned pools. Mitigating factors include (1) significant loan seasoning and clean performance history, (2) a comprehensive due diligence review and (3) certain representations and warranties mechanisms such as a loss review trigger and a breach reserve account.

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 ratings of A (sf), BBB (sf), BB (sf) and B (sf) address 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 rating 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, 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 for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

The full report providing additional analytical detail is available by clicking on the under related documents below or by contacting us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.