DBRS Finalizes Provisional Ratings on COLT 2019-4 Mortgage Loan Trust

DBRS, Inc. (DBRS) finalized its provisional ratings on the Mortgage Pass-Through Certificates, Series 2019-4 (the Certificates) issued by COLT 2019-4 Mortgage Loan Trust (the Trust) as follows:

-- $260.7 million Class A-1 at AAA (sf)
-- $23.6 million Class A-2 at AA (sf)
-- $32.7 million Class A-3 at A (sf)
-- $14.3 million Class M-1 at BBB (sf)
-- $12.0 million Class B-1 at BB (sf)
-- $6.0 million Class B-2 at B (sf)

The AAA (sf) rating on the Certificates reflects the 26.15% of credit enhancement (CE) provided by subordinated Certificates in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 19.45%, 10.20%, 6.15%, 2.75% and 1.05% of CE, 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 fixed- and adjustable-rate prime and non-prime first-lien residential mortgages. The Certificates are backed by 576 loans with a total principal balance of $352,977,726 as of the Cut-Off Date (September 1, 2019).

Caliber Home Loans, Inc. is the Originator and the Servicer for the entire portfolio. Aside from two loans which were originated under the Professional Elite and Investor Access program, the rest of the mortgages were originated under the following five programs:

(1) Elite Access (46.2% by balance) – Generally made to borrowers with strong credit history seeking loans with non-conforming balances who do not meet strict prime jumbo guidelines for various reasons. These loans may have interest-only (IO) features, higher debt-to-income (DTI) and loan-to-value (LTV) ratios or lower credit scores compared with those in traditional prime jumbo securitizations. This program has higher minimum FICO requirements than Premier Access and does not allow for mortgage lates in the past 12 months.

(2) Premier Access (30.0% by balance) – Generally made to borrowers with unblemished credit. These loans may have IO features, higher DTI and LTV ratios or lower credit scores compared with those in traditional prime jumbo securitizations. Though this program does not allow for derogatory credit events within the past four years, some borrowers may have had prior mortgage lates.

(3) Homeowner’s Access (14.3% by balance) – Made to borrowers who do not qualify for agency or prime jumbo mortgages for various reasons, such as loan size in excess of government limits, alternative or insufficient credit or prior derogatory credit events that occurred more than two years prior to origination.

(4) Fresh Start (7.1% by balance) – Generally made to borrowers with lower credit and borrowers who may have had significant recent credit events within the past 24 months.

(5) Investor (2.4% by balance) – Made to borrowers who finance investor properties where the mortgage loan would not meet agency or government guidelines because of such factors as property type, number of financed properties, lower borrower credit score or a seasoned credit event.

Wells Fargo Bank, N.A. (rated AA with a Stable trend by DBRS) will act as the Master Servicer, Securities Administrator and Certificate Registrar. U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS) will serve as Trustee.

Although the mortgage loans were originated to satisfy Consumer Financial Protection Bureau (CFPB) Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government or private-label non-agency prime jumbo products for the various reasons described above. In accordance with the CFPB Qualified Mortgage (QM) rules, 6.9% of the loans are designated as QM Safe Harbor, 28.7% as QM Rebuttable Presumption and 62.0% as Non-QM. Approximately 2.4% of the loans are made to investors for business purposes and are exempt from QM categorization.

The Servicer will generally fund advances of delinquent principal and interest on any mortgage until such loan becomes 180 days delinquent, and it is obligated to make advances in respect of taxes, insurance premiums and reasonable costs incurred in the course of servicing and disposing of properties.

On or after the earlier of (1) the two-year anniversary of the Closing Date and (2) the date when the aggregate stated principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Controlling Holder has the option to purchase all outstanding Certificates at a price equal to the outstanding class balance, plus accrued and unpaid interest, including any cap carry-over amounts.

The transaction employs a sequential-pay cash flow structure with a pro rata principal distribution among the senior tranches. Principal proceeds can be used to cover interest shortfalls on the Certificates as the outstanding senior Certificates are paid in full.

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 Certificates. 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 Certificates.

The ratings reflect transactional strengths that include the following:

-- Compliance with the ATR rules,
-- Strong underwriting standards,
-- Robust loan attributes and pool composition and
-- Satisfactory third-party due diligence review.

The transaction also includes the following challenges:

-- Representations and warranties framework,
-- Non-prime, QM-Rebuttable presumption or Non-QM loans,
-- Servicer advances of delinquent principal and interest and
-- The Servicer’s financial capabilities.

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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