Press Release

DBRS Assigns Provisional Ratings to Flagstar Mortgage Trust 2018-4

RMBS
June 14, 2018

DBRS, Inc. (DBRS) assigned the following provisional ratings to the Mortgage Pass-Through Certificates, Series 2018-4 (the Certificates) issued by Flagstar Mortgage Trust 2018-4 (the Trust):

-- $437.8 million Class A-1 at AAA (sf)
-- $396.9 million Class A-2 at AAA (sf)
-- $317.5 million Class A-3 at AAA (sf)
-- $256.2 million Class A-4 at AAA (sf)
-- $61.3 million Class A-5 at AAA (sf)
-- $140.7 million Class A-6 at AAA (sf)
-- $79.4 million Class A-7 at AAA (sf)
-- $60.3 million Class A-8 at AAA (sf)
-- $19.0 million Class A-9 at AAA (sf)
-- $40.9 million Class A-10 at AAA (sf)
-- $437.8 million Class A-X-1 at AAA (sf)
-- $4.2 million Class B-1 at AA (sf)
-- $10.5 million Class B-2 at A (sf)
-- $6.5 million Class B-3 at BBB (sf)
-- $4.0 million Class B-4 at BB (sf)

Class A-X-1 is an interest-only certificate. The class balance represents a notional amount.

Classes A-1, A-2, A-3, A-6 and A-7 are exchangeable certificates. These classes can be exchanged for a combination of initial exchangeable certificates as specified in the offering documents.

Classes A-2, A-3, A-4, A-5, A-6, A-7, A-8 and A-9 are super-senior certificates. These classes benefit from additional protection from senior support certificates (Class A-10) with respect to loss allocation.

The AAA (sf) ratings on the Certificates reflect the 6.25% of credit enhancement provided by subordinated Certificates in the pool. The AA (sf), A (sf), BBB (sf) and BB (sf) ratings reflect 5.35%, 3.10%, 1.70% and 0.85% 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 first-lien, fixed-rate, prime residential mortgages. The Certificates are backed by 750 loans with a total principal balance of $466,934,643 as of the Cut-off Date (June 1, 2018).

Flagstar Bank, FSB is the originator and servicer of the mortgage loans and the sponsor of the transaction. Wells Fargo Bank, N.A. will act as the Master Servicer, Securities Administrator, Certificate Registrar and Custodian. Wilmington Trust, National Association will serve as Trustee. IngletBlair, LLC will act as the Representation and Warranty (R&W) Reviewer.

The pool consists of fully amortizing fixed-rate mortgages with original terms to maturity of primarily 30 years. Approximately 52.3% of the pool are agency-eligible mortgage loans which were eligible for purchase by Fannie Mae or Freddie Mac.

The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

Unique to this transaction, the servicing fee payable to the Servicer comprises three separate components: the base servicing fee, the aggregate delinquent servicing fee and the aggregate incentive servicing fee. These fees vary based on the delinquency status of the related loan and will be paid from interest collections before distribution to the securities. The base servicing fee will reduce the net weighted-average coupon (WAC) payable to certificateholders as part of the aggregate expense calculation. However, the delinquent and incentive servicing fees will not be included in the reduction of Net WAC and will thus reduce available funds entitled to the certificateholders (except for the Class B-6-C Net WAC). To capture the impact of such potential fees, DBRS ran additional cash flow stresses based on its 60+-day delinquency and default curves, as detailed in the Cash Flow Analysis section of the related report.

The ratings reflect transactional strengths that include high-quality underlying assets and well-qualified borrowers.

This transaction exhibits certain challenges such as limited third-party due diligence as well as a R&W framework that contains materiality factors, an unrated R&W provider, knowledge qualifiers and sunset provisions that allow for certain R&Ws to expire within three to six years after the Closing Date. The framework is perceived by DBRS to be limiting compared with traditional lifetime R&W standards in certain DBRS-rated securitizations. To capture the perceived weaknesses, DBRS reduced the originator score in this pool. A lower originator score results in increased default and loss assumptions and provides additional cushions for the rated securities.

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, 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 in connection with this rating action.

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 under Related Documents 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.

Ratings

  • Date IssuedDebt RatedRatingTrendActionAttributesi
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-1AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-10AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-2AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-3AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-4AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-5AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-6AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-7AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-8AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-9AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class A-X-1AAA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class B-1AA (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class B-2A (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class B-3BBB (sf)--Provis.-New
    US
    14-Jun-18Mortgage Pass-Through Certificates, Series 2018-4, Class B-4BB (sf)--Provis.-New
    US
    More
    Less
Flagstar Mortgage Trust 2018-4
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.