DBRS Assigns Provisional Ratings to Wells Fargo Mortgage Backed Securities 2019-1 Trust

DBRS, Inc. (DBRS) assigned the following provisional ratings to the Mortgage Pass-Through Certificates, Series 2019-1 (the Certificates) issued by Wells Fargo Mortgage Backed Securities 2019-1 Trust (the Trust):

-- $604.9 million Class A-1 at AAA (sf)
-- $604.9 million Class A-2 at AAA (sf)
-- $453.7 million Class A-3 at AAA (sf)
-- $453.7 million Class A-4 at AAA (sf)
-- $151.2 million Class A-5 at AAA (sf)
-- $151.2 million Class A-6 at AAA (sf)
-- $362.9 million Class A-7 at AAA (sf)
-- $362.9 million Class A-8 at AAA (sf)
-- $242.0 million Class A-9 at AAA (sf)
-- $242.0 million Class A-10 at AAA (sf)
-- $90.7 million Class A-11 at AAA (sf)
-- $90.7 million Class A-12 at AAA (sf)
-- $75.6 million Class A-13 at AAA (sf)
-- $75.6 million Class A-14 at AAA (sf)
-- $75.6 million Class A-15 at AAA (sf)
-- $75.6 million Class A-16 at AAA (sf)
-- $65.9 million Class A-17 at AAA (sf)
-- $65.9 million Class A-18 at AAA (sf)
-- $670.7 million Class A-19 at AAA (sf)
-- $670.7 million Class A-20 at AAA (sf)
-- $670.7 million Class A-IO1 at AAA (sf)
-- $604.9 million Class A-IO2 at AAA (sf)
-- $453.7 million Class A-IO3 at AAA (sf)
-- $151.2 million Class A-IO4 at AAA (sf)
-- $362.9 million Class A-IO5 at AAA (sf)
-- $242.0 million Class A-IO6 at AAA (sf)
-- $90.7 million Class A-IO7 at AAA (sf)
-- $75.6 million Class A-IO8 at AAA (sf)
-- $75.6 million Class A-IO9 at AAA (sf)
-- $65.9 million Class A-IO10 at AAA (sf)
-- $670.7 million Class A-IO11 at AAA (sf)
-- $12.8 million Class B-1 at AA (sf)
-- $11.7 million Class B-2 at A (sf)
-- $7.8 million Class B-3 at BBB (sf)
-- $3.6 million Class B-4 at BB (sf)

Classes A-IO1, A-IO2, A-IO3, A-IO4, A-IO5, A-IO6, A-IO7, A-IO8, A-IO9, A-IO10 and A-IO11 are interest-only certificates. The class balance represents a notional amount.

Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-9, A-10, A-11, A-13, A-15, A-17, A-19, A-20, A-IO2, A-IO3, A-IO4, A-IO6 and A-IO11 are exchangeable certificates. These classes can be exchanged for a combination of initial exchangeable certificates as specified in the offering documents.

Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-15 and A-16 are super senior certificates. These classes benefit from additional protection from senior support certificates (Class A-17 and A-18) with respect to loss allocation.

The AAA (sf) ratings on the Certificates reflect the 5.75% of credit enhancement provided by subordinated Certificates in the pool. The AA (sf), A (sf), BBB (sf) and BB (sf) ratings reflect 3.95%, 2.30%, 1.20% and 0.70% 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 1,017 loans with a total principal balance of $711,662,431 as of the Cut-off Date (January 1, 2019).

The pool consists of fully amortizing fixed-rate mortgages with original terms to maturity of 30 years and a weighted-average loan age of six months. All of the mortgage loans were originated by Wells Fargo Bank, N.A. (Wells Fargo) or were acquired by Wells Fargo from its qualified correspondents. In addition, Wells Fargo is the Servicer of the mortgage loans, as well as the Mortgage Loan Seller and Sponsor of the transaction. Wells Fargo will also act as the Master Servicer, Securities Administrator and Custodian. DBRS rates both Wells Fargo’s Long-Term Issuer Rating and Long-Term Senior Debt rating at AA with Stable trends and rates its Short-Term Instruments at R-1 (high) with a Stable trend.

Wilmington Savings Fund Society, FSB will serve as Trustee. Opus Capital Markets Consultants, LLC (Opus) will act as the Representation and Warranty (R&W) Reviewer.

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 with clean payment histories, well-qualified borrowers, a highly rated R&W provider and satisfactory third-party due diligence.

Although Wells Fargo had been a prolific RMBS issuer pre-crisis, the company recently re-entered the securitization market with its first prime jumbo transaction in October 2018 after an extensive hiatus. As a result, Wells Fargo has limited publicly available performance history on securitized loans. Mitigating factors include robust performance on Wells Fargo’s non-agency originations since 2011, satisfactory operational risk assessments and a comprehensive due diligence review.

In addition, this transaction has a R&W framework that contains certain weaknesses, including 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 methodology is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, which can be found on dbrs.com under Methodologies & Criteria.

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 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.

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