DBRS Finalizes Provisional Ratings on Mello Mortgage Capital Acceptance 2018-MTG2

DBRS, Inc. (DBRS) finalized its provisional ratings on the Mortgage Pass-Through Certificates, Series 2018-MTG2 (the Certificates) issued by Mello Mortgage Capital Acceptance 2018-MTG2 (the Trust) as follows:

-- $249.3 million Class A1 at AAA (sf)
-- $249.3 million Class A2 at AAA (sf)
-- $187.0 million Class A3 at AAA (sf)
-- $187.0 million Class A4 at AAA (sf)
-- $12.5 million Class A5 at AAA (sf)
-- $12.5 million Class A6 at AAA (sf)
-- $49.9 million Class A7 at AAA (sf)
-- $49.9 million Class A8 at AAA (sf)
-- $25.7 million Class A9 at AAA (sf)
-- $25.7 million Class A10 at AAA (sf)
-- $199.4 million Class A11 at AAA (sf)
-- $62.3 million Class A12 at AAA (sf)
-- $199.4 million Class A13 at AAA (sf)
-- $62.3 million Class A14 at AAA (sf)
-- $275.0 million Class A15 at AAA (sf)
-- $275.0 million Class A16 at AAA (sf)
-- $37.4 million Class A17 at AAA (sf)
-- $12.5 million Class A18 at AAA (sf)
-- $37.4 million Class A19 at AAA (sf)
-- $12.5 million Class A20 at AAA (sf)
-- $162.0 million Class A21 at AAA (sf)
-- $24.9 million Class A22 at AAA (sf)
-- $162.0 million Class A23 at AAA (sf)
-- $24.9 million Class A24 at AAA (sf)
-- $87.3 million Class A25 at AAA (sf)
-- $87.3 million Class A26 at AAA (sf)
-- $275.0 million Class AX1 at AAA (sf)
-- $249.3 million Class AX2 at AAA (sf)
-- $187.0 million Class AX3 at AAA (sf)
-- $12.5 million Class AX4 at AAA (sf)
-- $49.9 million Class AX5 at AAA (sf)
-- $25.7 million Class AX6 at AAA (sf)
-- $275.0 million Class AX7 at AAA (sf)
-- $37.4 million Class AX8 at AAA (sf)
-- $12.5 million Class AX9 at AAA (sf)
-- $162.0 million Class AX10 at AAA (sf)
-- $24.9 million Class AX11 at AAA (sf)
-- $275.0 million Class AX12 at AAA (sf)
-- $5.4 million Class B1 at AA (sf)
-- $5.1 million Class B2 at A (sf)
-- $3.4 million Class B3 at BBB (sf)
-- $1.9 million Class B4 at BB (sf)
-- $880.0 thousand Class B5 at B (sf)

Classes AX1, AX2, AX3, AX4, AX5, AX6, AX7, AX8, AX9, AX10, AX11 and AX12 are interest-only Certificates. The class balances represent notional amounts.

Classes A1, A2, A3, A4, A6, A7, A8, A10, A11, A12, A13, A14, A15, A16, A17, A18, A23, A24, A25, A26, AX2, AX3, AX4, AX5, AX6, AX7, AX10, AX11 and AX12 are exchangeable Certificates. These classes can be exchanged for combinations of exchange Certificates as specified in the offering documents.

Classes A1, A2, A3, A4, A5, A6, A7, A8, A11, A12, A13, A14, A17, A18, A19, A20, A21, A22, A23, A24, A25 and A26 are super-senior Certificates. These classes benefit from additional protection from senior support Certificates (Classes A9 and A10) 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), BB (sf) and B (sf) ratings reflect 4.40%, 2.65%, 1.50%, 0.85% and 0.55% 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 396 loans with a total principal balance of $293,293,146 as of the Cut-Off Date (October 1, 2018).

loanDepot.com, LLC (loanDepot) is the Originator, Seller and Servicing Administrator of the mortgage loans, and Artemis Management LLC is the Sponsor of the transaction. LD Holdings Group LLC, the parent company of the Sponsor and Seller, will serve as Guarantor with respect to the remedy obligations of the Seller. LDPMF LLC, a subsidiary of the Sponsor and an affiliate of the Seller, will act as Depositor of the transaction.

Cenlar FSB will act as the Servicer. Wells Fargo Bank, N.A. (rated AA with a Stable trend by DBRS) will act as the Master Servicer and Securities Administrator. Wilmington Savings Fund Society, FSB will serve as Trustee, and Deutsche Bank National Trust Company will serve as Custodian.

The pool consists of fully amortizing fixed-rate mortgages with original terms to maturity of 30 years. Approximately 20.9% of the pool are conforming high-balance mortgage loans that were underwritten by loanDepot using an automated underwriting system designated by Fannie Mae or Freddie Mac and were eligible for purchase by such agencies. The remaining 80.1% of the pool are traditional, non-agency, prime jumbo mortgage loans.

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

The ratings reflect transactional strengths that include high-quality underlying assets, well-qualified borrowers and satisfactory third-party due diligence review.

The Depositor has made certain representations and warranties concerning the mortgage loans. The enforcement mechanism for breaches of representations includes automatic breach reviews by a third-party reviewer for any seriously delinquent loans, and resolution of disputes may ultimately be subject to determination in an arbitration proceeding.

DBRS views the representations and warranties features for this transaction to be consistent with previous DBRS-rated prime securitizations, which include certain weaknesses, such as an unrated representations and warranties provider and sunset provisions on certain representations related to fraud and underwriting. To capture the perceived weaknesses, DBRS adjusted the originator score downward for all loans. The full description of the representations and warranties standard, the mitigating factors and the DBRS analysis are detailed in the related report.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, 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 link under Related Documents below or by contacting us at info@dbrs.com.