DBRS Morningstar Finalizes Provisional Ratings on GS Mortgage-Backed Securities Trust 2019-PJ3

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the Mortgage Pass-Through Certificates, Series 2019-PJ3 (the Certificates) issued by GS Mortgage-Backed Securities Trust 2019-PJ3 (GSMBS 2019-PJ3) as follows:

-- $230.4 million Class A-1 at AAA (sf)
-- $230.4 million Class A-2 at AAA (sf)
-- $16.9 million Class A-3 at AAA (sf)
-- $16.9 million Class A-4 at AAA (sf)
-- $172.8 million Class A-5 at AAA (sf)
-- $172.8 million Class A-6 at AAA (sf)
-- $57.6 million Class A-7 at AAA (sf)
-- $57.6 million Class A-8 at AAA (sf)
-- $247.3 million Class A-9 at AAA (sf)
-- $247.3 million Class A-10 at AAA (sf)
-- $247.3 million Class A-X-1 at AAA (sf)
-- $16.9 million Class A-X-3 at AAA (sf)
-- $172.8 million Class A-X-5 at AAA (sf)
-- $57.6 million Class A-X-7 at AAA (sf)
-- $5.4 million Class B-1 at AA (high) (sf)
-- $9.2 million Class B-2 at A (sf)
-- $3.1 million Class B-3 at BBB (high) (sf)
-- $2.6 million Class B-4 at BB (high) (sf)
-- $1.5 million Class B-5 at B (high) (sf)

Classes A-X-1, A-X-3, A-X-5 and A-X-7 are interest-only certificates. The class balances represent notional amounts.

Classes A-1, A-2, A-4, A-6, A-8, A-9 and A-10 are exchangeable certificates. These classes can be exchanged for combinations of exchange certificates as specified in the offering documents.

Classes A-1, A-2, A-5, A-6, A-7 and A-8 are super-senior certificates. These classes benefit from additional protection from the senior support certificates (Classes A-3 and A-4) with respect to loss allocation.

The AAA (sf) ratings on the Certificates reflects 8.75% of credit enhancement provided by subordinated certificates in the pool. The AA (high) (sf), A (sf), BBB (high) (sf), BB (high) (sf) and B (high) (sf) ratings reflect 6.75%, 3.35%, 2.20%, 1.25% and 0.70% of credit enhancement, respectively.

Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction.

GSMBS 2019-PJ3 is a securitization of a portfolio of first-lien, fixed-rate, prime residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 394 loans with a total principal balance of $271,016,060 as of the Cut-Off Date (October 1, 2019).

The originators for the mortgage pool are HomeBridge Financial Services, Inc. (25.3%), loanDepot.com, LLC (19.9%), and various other originators, each comprising less than 15.0% of the mortgage loans. Goldman Sachs Mortgage Company is the Sponsor and the Mortgage Loan Seller of the transaction. For certain originators, the related loans (8.9%) were sold to MAXEX Clearing LLC and were subsequently acquired by the Mortgage Loan Seller.

NewRez LLC doing business as Shellpoint Mortgage Servicing will service all mortgage loans within the pool. Wells Fargo Bank, N.A. (rated AA with a Stable trend by DBRS Morningstar) will act as the Master Servicer, Securities Administrator and Custodian. U.S. Bank Trust National Association will serve as Delaware Trustee. Pentalpha Surveillance LLC will serve as the representations and warranties (R&W) File Reviewer.

The pool consists of fully amortizing fixed-rate mortgages with original terms to maturity of 30 years and a weighted-average (WA) loan age of four months. Approximately 40.6% of the pool are conforming, high-balance mortgage loans that were underwritten using an automated underwriting system designated by Fannie Mae or Freddie Mac and were eligible for purchase by such agencies. The remaining 59.4% of the pool are traditional, non-agency, prime jumbo mortgage loans.

Compared with prior GSMBS prime securitizations, the GSMBS 2019-PJ3 pool exhibits a similar WA original loan-to-value (LTV) ratio; however, the portfolio contains a more barbelled distribution of LTV ratios with larger concentrations in the higher LTV buckets. For this transaction, 20.2% of the pool have current combined LTV ratios over 80.0% but are generally below 95.0%.

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 a satisfactory third-party due diligence review.

This transaction employs an R&W framework that contains certain weaknesses, such as materiality factors, knowledge qualifiers and sunset provisions that allow for certain R&Ws to expire within three to five years after the Closing Date. The framework is perceived by DBRS Morningstar to be limiting compared with traditional lifetime R&W standards in certain DBRS Morningstar-rated securitizations. To capture the perceived weaknesses in the R&W framework, DBRS Morningstar 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 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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