DBRS Finalizes Provisional Ratings on OBX 2019-INV2 Trust

DBRS, Inc. (DBRS) finalized the provisional ratings on the following Mortgage-Backed Notes, Series 2019-INV2 (the Notes) issued by OBX 2019-INV2 Trust:

-- $345.4 million Class A-1 at AAA (sf)
-- $345.4 million Class A-2 at AAA (sf)
-- $307.0 million Class A-3 at AAA (sf)
-- $307.0 million Class A-4 at AAA (sf)
-- $230.3 million Class A-5 at AAA (sf)
-- $138.2 million Class A-6 at AAA (sf)
-- $230.3 million Class A-7 at AAA (sf)
-- $34.5 million Class A-8 at AAA (sf)
-- $11.5 million Class A-9 at AAA (sf)
-- $46.1 million Class A-10 at AAA (sf)
-- $76.8 million Class A-11 at AAA (sf)
-- $76.8 million Class A-11IO at AAA (sf)
-- $76.8 million Class A-12 at AAA (sf)
-- $76.8 million Class A-13 at AAA (sf)
-- $38.4 million Class A-14 at AAA (sf)
-- $38.4 million Class A-15 at AAA (sf)
-- $268.6 million Class A-16 at AAA (sf)
-- $268.6 million Class A-17 at AAA (sf)
-- $76.8 million Class A-18 at AAA (sf)
-- $115.1 million Class A-19 at AAA (sf)
-- $115.1 million Class A-20 at AAA (sf)
-- $138.2 million Class A-21 at AAA (sf)
-- $34.5 million Class A-22 at AAA (sf)
-- $11.5 million Class A-23 at AAA (sf)
-- $46.1 million Class A-24 at AAA (sf)
-- $38.4 million Class A-25 at AAA (sf)
-- $172.7 million Class A-26 at AAA (sf)
-- $172.7 million Class A-27 at AAA (sf)
-- $57.6 million Class A-28 at AAA (sf)
-- $57.6 million Class A-29 at AAA (sf)
-- $92.1 million Class A-30 at AAA (sf)
-- $92.1 million Class A-31 at AAA (sf)
-- $345.4 million Class A-IO1 at AAA (sf)
-- $345.4 million Class A-IO2 at AAA (sf)
-- $76.8 million Class A-IO3 at AAA (sf)
-- $38.4 million Class A-IO4 at AAA (sf)
-- $345.4 million Class A-IO5 at AAA (sf)
-- $138.2 million Class A-IO6 at AAA (sf)
-- $345.4 million Class A-IO7 at AAA (sf)
-- $34.5 million Class A-IO8 at AAA (sf)
-- $11.5 million Class A-IO9 at AAA (sf)
-- $46.1 million Class A-IO10 at AAA (sf)
-- $307.0 million Class A-IO12 at AAA (sf)
-- $76.8 million Class A-IO13 at AAA (sf)
-- $230.3 million Class A-IO14 at AAA (sf)
-- $38.4 million Class A-IO15 at AAA (sf)
-- $268.6 million Class A-IO16 at AAA (sf)
-- $115.1 million Class A-IO17 at AAA (sf)
-- $172.7 million Class A-IO18 at AAA (sf)
-- $57.6 million Class A-IO19 at AAA (sf)
-- $92.1 million Class A-IO20 at AAA (sf)
-- $307.0 million Class A-IO21 at AAA (sf)
-- $9.6 million Class B-1 at A (high) (sf)
-- $9.6 million Class B-IO1 at A (high) (sf)
-- $9.6 million Class B-1A at A (high) (sf)
-- $9.0 million Class B-2 at A (sf)
-- $9.0 million Class B-IO2 at A (sf)
-- $9.0 million Class B-2A at A (sf)
-- $8.3 million Class B-3 at BBB (sf)
-- $5.9 million Class B-4 at BB (sf)
-- $2.1 million Class B-5 at B (sf)

Classes A-IO1, A-IO2, A-IO3, A-IO4, A-IO5, A-IO6, A-IO7, A-IO8, A-IO9, A-IO10, A-11IO, A-IO12, A-IO13, A-IO14, A-IO15, A-IO16, A-IO17, A-IO18, A-IO19, A-IO20, A-IO21, B-IO1 and B-IO2 are interest-only notes. The class balances represent notional amounts.

Classes A-1, A-2, A-3, A-4, A-5, A-7, A-12, A-13, A-14, A-16, A-17, A-18, A-19, A-20, A-21, A-22, A-23, A-24, A-25, A-26, A-27, A-28, A-29, A-30, A-31, A-IO2, A-IO3, A-IO5, A-IO7, A-IO12, A-IO13, A-IO14, A-IO16, A-IO17, A-IO18, A-IO19, A-IO20, A-IO21, B-1A and B-2A are exchangeable notes. These classes can be exchanged for a combination of initial exchangeable notes as specified in the offering documents.

Classes A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-18, A-21, A-22, A-23, A-24, A-26, A-27, A-28, A-29, A-30 and A-31 are super senior notes. These classes benefit from additional protection from the senior support notes (Classes A-14, A-15 and A-25) with respect to loss allocation.

The AAA (sf) ratings on the Notes reflect the 10.00% of credit enhancement provided by subordinated certificates in the pool. The A (high) (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 7.50%, 5.15%, 3.00%, 1.45% and 0.90% 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 prime, first-lien, fixed-rate, agency-eligible investment property residential mortgages funded by the issuance of mortgage-backed notes. The Notes are backed by 1,087 loans with a total principal balance of $383,759,828 as of the Cut-Off Date (June 1, 2019).

The pool is composed of fully amortizing, fixed-rate conventional mortgages. All loans but one have original terms to maturity of 30 years. All loans in the pool were made to investors for business purposes and, consequently, are not subject to the Consumer Financial Protection Bureau Qualified Mortgage and Ability-to-Repay Rules. In addition, 33 borrowers have multiple mortgages (71 loans in total) included in the securitized portfolio, which comprise 6.6% of the pool by current balance.

All mortgage loans in the portfolio were eligible for purchase by Fannie Mae or Freddie Mac. DBRS conducted extensive analysis on the Fannie Mae and Freddie Mac historical datasets dating back to 1999. Performance on these loans has generally outperformed their non-agency counterparts. In addition, DBRS further analyzed agency-conforming investor loans with FICO and loan to-value profiles similar to the loans included in the OBX 2019-INV2 pool. Details on the performance of the Fannie Mae and Freddie Mac datasets can be found in the Historical Performance section of the rating report.

The mortgage loans were originated by Quicken Loans Inc. (Quicken; 75.7%) and various other originators, each comprising less than 15.0% of the loans.

The loans will be serviced by Quicken (75.7%), Select Portfolio Servicing, Inc. (19.9%) and Specialized Loan Servicing LLC (4.4%).

Onslow Bay Financial LLC is the Seller, Sponsor and Principal & Interest (P&I) Advancing Party for the transaction. Wells Fargo Bank, N.A. (Wells Fargo; rated AA with a Stable trend by DBRS) will act as the Master Servicer, Paying Agent, Note Registrar and Custodian. Wilmington Savings Fund Society, FSB will serve as the Owner Trustee and Indenture Trustee.

Advances of delinquent P&I will be made on any loan until such loan becomes 120 days delinquent, to the extent that such advances are determined to be recoverable (for more details on the funding of advances for delinquent P&I, see the loss severity section of this report). The Servicers are obligated to make advances in respect of taxes, insurance premiums and reasonable costs incurred in the course of servicing and disposing of properties.

The Seller intends to retain (directly or through a majority-owned affiliate) a horizontal residual interest in 5% of the fair value of all the Notes issued by the Issuer (other than the Class R Notes) and the trust certificate to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder.

The Seller will have the option, but not the obligation, to repurchase any mortgage loan that becomes 60 or more days delinquent under the Mortgage Bankers Association delinquency method or real estate-owned property, provided that such repurchase will occur at the optional repurchase price and that such repurchases in aggregate do not exceed 10% of the total principal balance as of the Cut-Off Date.

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, extensive performance history, satisfactory third-party due diligence review, structural enhancements and 100% current loans.

This transaction employs a representations and warranty (R&W) framework that contains certain weaknesses, such as a trigger review period, an unrated R&W provider and certain knowledge qualifiers. To capture the perceived weaknesses in the R&W framework, DBRS reduced the originator scores 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 is detailed in the related rating 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 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.

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