DBRS Morningstar Finalizes Provisional Ratings on CIM Trust 2019-J2

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the Mortgage Pass-Through Certificates, Series 2019-J2 (the Certificates) issued by CIM Trust 2019-J2 (CIM 2019-J2) as follows:

-- $287.3 million Class A-1 at AAA (sf)
-- $287.3 million Class A-2 at AAA (sf)
-- $215.4 million Class A-3 at AAA (sf)
-- $215.4 million Class A-4 at AAA (sf)
-- $71.8 million Class A-5 at AAA (sf)
-- $71.8 million Class A-6 at AAA (sf)
-- $229.8 million Class A-7 at AAA (sf)
-- $229.8 million Class A-8 at AAA (sf)
-- $57.5 million Class A-9 at AAA (sf)
-- $57.5 million Class A-10 at AAA (sf)
-- $14.4 million Class A-11 at AAA (sf)
-- $14.4 million Class A-12 at AAA (sf)
-- $33.5 million Class A-13 at AAA (sf)
-- $33.5 million Class A-14 at AAA (sf)
-- $320.7 million Class A-15 at AAA (sf)
-- $320.7 million Class A-16 at AAA (sf)
-- $320.7 million Class A-IO1 at AAA (sf)
-- $287.3 million Class A-IO2 at AAA (sf)
-- $215.4 million Class A-IO3 at AAA (sf)
-- $71.8 million Class A-IO4 at AAA (sf)
-- $229.8 million Class A-IO5 at AAA (sf)
-- $57.5 million Class A-IO6 at AAA (sf)
-- $14.4 million Class A-IO7 at AAA (sf)
-- $33.5 million Class A-IO8 at AAA (sf)
-- $320.7 million Class A-IO9 at AAA (sf)
-- $2.2 million Class B-1A at AA (sf)
-- $2.2 million Class B-IO1 at AA (sf)
-- $2.2 million Class B-1 at AA (sf)
-- $6.3 million Class B-2A at A (sf)
-- $6.3 million Class B-IO2 at A (sf)
-- $6.3 million Class B-2 at A (sf)
-- $3.0 million Class B-3 at BBB (sf)
-- $2.7 million Class B-4 at BB (sf)
-- $1.2 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, B-IO1 and B-IO2 are interest-only certificates. The class balances represent notional amounts.

Classes A-1, A-2, A-3, A-5, A-6, A-7, A-8, A-9, A-11, A-13, A-15, A-16, A-IO2, A-IO4, A-IO5, A-IO9, B-1 and B-2 are exchangeable certificates. These classes can be exchanged for combinations of exchanged 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 and A-12 are super-senior certificates. These classes benefit from additional protection from the senior support certificates (Classes A-13 and A-14) with respect to loss allocation.

The AAA (sf) ratings on the Certificates reflect 5.10% of credit enhancement provided by subordinated certificates in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 4.45%, 2.60%, 1.70%, 0.90% and 0.55% of credit enhancement, respectively.

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

The Certificates are backed by 441 loans with a total principal balance of $337,945,089 as of the Cut-Off Date (October 1, 2019).

The credit quality of the collateral pool, the transaction structure and the representations and warranties (R&W) framework and enforcement mechanism of CIM 2019-J2 is similar to that of CIM Trust 2019-J1 (CIM 2019-J1), a deal that DBRS Morningstar rated in August 2019. That said, unlike CIM 2019-J1, where the mortgage loans were divided into two collateral groups based on original terms to maturity, the collateral pool backing CIM 2019-J2 consists of one group.

The originators for the aggregate mortgage pool are Quicken Loans Inc. (Quicken; 59.9%), loanDepot.com, LLC (loanDepot; 14.3%), Home Point Financial Corporation (10.0%), JMAC Lending, Inc. (5.5%) and various other originators, each comprising no more than 5.0% of the pool by principal balance. On the Closing Date, Fifth Avenue Trust (the Seller) will acquire the mortgage loans from Bank of America, N.A. (BANA; rated AA (low) with a Stable trend by DBRS Morningstar).

Through bulk purchases, BANA generally acquired the mortgage loans underwritten to (1) the Quicken guidelines (59.9%), (2) BANA’s jumbo whole loan acquisition guidelines (24.8%), (3) pursuant to the guidelines of loanDepot (12.0%) or (4) Fannie Mae’s or Freddie Mac’s Automated Underwriting System (3.3%). DBRS Morningstar conducted an operational risk assessment on BANA’s aggregator platform, as well as certain originators, and deemed them acceptable.

Shellpoint Mortgage Servicing (SMS) will service 100% of the mortgage loans, directly or through subservicers. Wells Fargo Bank, N.A. (rated AA with a Stable trend by DBRS Morningstar) will act as Master Servicer, Securities Administrator and Custodian. Wilmington Savings Fund Society, FSB will serve as Trustee. Chimera Funding TRS LLC will serve as the R&W Provider.

The holder of a majority of the most subordinate class of certificates outstanding (the Controlling Holder) has the option to engage an asset manager to review the Servicer’s actions regarding the mortgage loans, which includes determining whether the Servicer is making modifications or servicing the loans in accordance with the pooling and servicing agreement.

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 credit attributes, well-qualified borrowers, satisfactory third-party due diligence review and structural enhancements.

This transaction employs an R&W framework that contains certain weaknesses, such as unrated R&W entities providing R&W and an unrated entity (the R&W Provider) providing a backstop and sunset provisions on the backstop. 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 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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