DBRS Morningstar Finalizes Provisional Ratings on New Residential Mortgage Loan Trust 2019-5

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following Mortgage-Backed Notes, Series 2019-5 (the Notes) issued by New Residential Mortgage Loan Trust 2019-5 (NRMLT or the Trust):

-- $478.8 million Class A-1 at AAA (sf)
-- $478.8 million Class A-IO at AAA (sf)
-- $478.8 million Class A-1A at AAA (sf)
-- $478.8 million Class A-1B at AAA (sf)
-- $478.8 million Class A-1C at AAA (sf)
-- $478.8 million Class A-1D at AAA (sf)
-- $478.8 million Class A1-IOA at AAA (sf)
-- $478.8 million Class A1-IOB at AAA (sf)
-- $478.8 million Class A1-IOC at AAA (sf)
-- $478.8 million Class A1-IOD at AAA (sf)
-- $536.5 million Class A-2 at AAA (sf)
-- $478.8 million Class A at AAA (sf)
-- $57.6 million Class B-1 at AAA (sf)
-- $57.6 million Class B1-IO at AAA (sf)
-- $57.6 million Class B-1A at AAA (sf)
-- $57.6 million Class B-1B at AAA (sf)
-- $57.6 million Class B-1C at AAA (sf)
-- $57.6 million Class B-1D at AAA (sf)
-- $57.6 million Class B1-IOA at AAA (sf)
-- $57.6 million Class B1-IOB at AAA (sf)
-- $57.6 million Class B1-IOC at AAA (sf)
-- $30.9 million Class B-2 at AA (sf)
-- $30.9 million Class B2-IO at AA (sf)
-- $30.9 million Class B-2A at AA (sf)
-- $30.9 million Class B-2B at AA (sf)
-- $30.9 million Class B-2C at AA (sf)
-- $30.9 million Class B-2D at AA (sf)
-- $30.9 million Class B2-IOA at AA (sf)
-- $30.9 million Class B2-IOB at AA (sf)
-- $30.9 million Class B2-IOC at AA (sf)
-- $48.3 million Class B-3 at BBB (high) (sf)
-- $48.3 million Class B3-IO at BBB (high) (sf)
-- $48.3 million Class B-3A at BBB (high) (sf)
-- $48.3 million Class B-3B at BBB (high) (sf)
-- $48.3 million Class B-3C at BBB (high) (sf)
-- $48.3 million Class B-3D at BBB (high) (sf)
-- $48.3 million Class B3-IOA at BBB (high) (sf)
-- $48.3 million Class B3-IOB at BBB (high) (sf)
-- $48.3 million Class B3-IOC at BBB (high) (sf)
-- $13.8 million Class B-4 at BBB (sf)
-- $13.8 million Class B-4A at BBB (sf)
-- $13.8 million Class B-4B at BBB (sf)
-- $13.8 million Class B-4C at BBB (sf)
-- $13.8 million Class B4-IOA at BBB (sf)
-- $13.8 million Class B4-IOB at BBB (sf)
-- $13.8 million Class B4-IOC at BBB (sf)
-- $19.3 million Class B-5 at BB (sf)
-- $19.3 million Class B-5A at BB (sf)
-- $19.3 million Class B-5B at BB (sf)
-- $19.3 million Class B-5C at BB (sf)
-- $19.3 million Class B-5D at BB (sf)
-- $19.3 million Class B5-IOA at BB (sf)
-- $19.3 million Class B5-IOB at BB (sf)
-- $19.3 million Class B5-IOC at BB (sf)
-- $19.3 million Class B5-IOD at BB (sf)
-- $27.9 million Class B-6 at B (sf)
-- $27.9 million Class B-6A at B (sf)
-- $27.9 million Class B-6B at B (sf)
-- $27.9 million Class B-6C at B (sf)
-- $27.9 million Class B6-IOA at B (sf)
-- $27.9 million Class B6-IOB at B (sf)
-- $27.9 million Class B6-IOC at B (sf)
-- $61.0 million Class B-8 at B (sf)

Classes A-IO, A1-IOA, A1-IOB, A1-IOC, A1-IOD, B1-IO, B1-IOA, B1-IOB, B1-IOC, B2-IO, B2-IOA, B2-IOB, B2-IOC, B3-IO, B3-IOA, B3-IOB, B3-IOC, B4-IOA, B4-IOB, B4-IOC, B5-IOA, B5-IOB, B5-IOC, B5-IOD, B6-IOA, B6-IOB and B6-IOC are interest-only notes. The class balances represent notional amounts.

Classes A-1A, A-1B, A-1C, A-1D, A1-IOA, A1-IOB, A1-IOC, A1-IOD, A-2, A, B-1A, B-1B, B-1C, B-1D, B1-IOA, B1-IOB, B1-IOC, B-2A, B-2B, B-2C, B-2D, B2-IOA, B2-IOB, B2-IOC, B-3A, B-3B, B-3C, B-3D, B3-IOA, B3-IOB, B3-IOC, B-4A, B-4B, B-4C, B4-IOA, B4-IOB, B4-IOC, B-5A, B-5B, B-5C, B-5D, B5-IOA, B5-IOB, B5-IOC, B5-IOD, B-6A, B-6B, B-6C, B6-IOA, B6-IOB, B6-IOC and B-8 are exchangeable notes. These classes can be exchanged for combinations of initial exchangeable notes as specified in the offering documents.

The AAA (sf) ratings on the Notes reflect 27.85% of credit enhancement provided by subordinated notes in the pool. The AA (sf), BBB (high) (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 23.70%, 17.20%, 15.35%, 12.75% and 9.00% 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 seasoned portfolio of performing and re-performing first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 6,300 loans with a total principal balance of $743,535,298 as of the Cut-Off Date (September 1, 2019).

The loans are significantly seasoned with a weighted-average (WA) age of 175 months. As of the Cut-Off Date, 88.5% of the pool is current, 10.5% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method and 1.0% is in bankruptcy (all bankruptcy loans are performing or 30 days delinquent). Approximately 60.4% and 67.1% of the mortgage loans have been zero times 30 days delinquent for the past 24 months and 12 months, respectively, under the MBA delinquency method. The portfolio contains 62.8% modified loans and the modifications happened more than two years ago for 83.2% of the modified loans. The majority of the pool, 99.5%, is exempt from the Ability-to-Repay (ATR)/Qualified Mortgage (QM) rules because of seasoning. In accordance with the Consumer Financial Protection Bureau’s QM/ATR rules, 0.2% of the loans are designated as QM Safe Harbor, 0.1% as Rebuttable Presumption and 0.2% as non-QM.

The Seller, NRZ Sponsor VII LLC (NRZ), acquired the loans prior to the Closing Date in connection with the termination of various securitization trusts and from a whole-loan purchase. Upon acquiring the loans, NRZ, through an affiliate, New Residential Funding 2019-5 LLC (the Depositor), will contribute the loans to the Trust. As the Sponsor, New Residential Investment Corp., through a majority-owned affiliate, will acquire and retain a 5% eligible vertical interest in each class of securities to be issued (other than the residual notes) to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder. These loans were originated and previously serviced by various entities through purchases in the secondary market.

As of the Cut-Off Date, 45.8% of the pool is serviced by PHH Mortgage Corporation, 43.5% by Nationstar Mortgage LLC doing business as (d/b/a) Mr. Cooper Group, Inc. (Nationstar), 5.1% by NewRez LLC d/b/a Shellpoint Mortgage Servicing (SMS), 4.4% by Select Portfolio Servicing, Inc., 0.8% by PNC Mortgage and 0.5% by Fay Servicing, LLC. Nationstar will also act as the Master Servicer and SMS will act as the Special Servicer.

The Seller, NRZ, will have the option to repurchase any loan that becomes 60 or more days delinquent under the MBA method or any real estate owned property acquired in respect of a mortgage loan at a price equal to the principal balance of the loan (Optional Repurchase Price), provided that such repurchases will be limited to 10% of the principal balance of the mortgage loans as of the Cut-Off Date.

Unlike other seasoned re-performing loan securitizations, the servicers in this transaction will advance principal and interest on delinquent mortgages to the extent that such advances are deemed recoverable.

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 underlying assets with significant seasoning, relatively clean payment histories and robust loan attributes with respect to credit scores, product types and loan-to-value ratios. Additionally, historically, NRMLT securitizations have exhibited fast voluntary prepayment rates.

The transaction employs a relatively weak representations and warranties framework that includes an unrated representation provider (NRZ), certain knowledge qualifiers and fewer mortgage loan representations relative to DBRS Morningstar criteria for seasoned pools.

Satisfactory third-party due diligence was performed on the pool for regulatory compliance, title/lien and payment history. Updated Home Data Index and/or broker price opinions were provided for the pool; however, a reconciliation was not performed on the updated values.

Certain loans have missing assignments or endorsements as of the Closing Date. Given the relatively clean performance history of the mortgages and the operational capability of the servicers, DBRS Morningstar believes that the risk of impeding or delaying foreclosure is remote.

The full description of the strengths, challenges and mitigating factors are detailed in the related rating report.

The DBRS Morningstar ratings 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 Notes.

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.

This rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 [email protected].

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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