DBRS Morningstar Assigns Provisional Ratings to Flagstar Mortgage Trust 2019-2

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Mortgage Pass-Through Certificates, Series 2019-2 (the Certificates) to be issued by Flagstar Mortgage Trust 2019-2 (FSMT 2019-2):

-- $338.8 million Class A-1 at AAA (sf)
-- $305.9 million Class A-2 at AAA (sf)
-- $229.4 million Class A-3 at AAA (sf)
-- $30.6 million Class A-4 at AAA (sf)
-- $30.6 million Class A-5 at AAA (sf)
-- $15.3 million Class A-6 at AAA (sf)
-- $260.0 million Class A-7 at AAA (sf)
-- $45.9 million Class A-8 at AAA (sf)
-- $76.5 million Class A-9 at AAA (sf)
-- $290.6 million Class A-10 at AAA (sf)
-- $32.9 million Class A-11 at AAA (sf)
-- $338.8 million Class A-X-1 at AAA (sf)
-- $5.8 million Class B-1 at AA (sf)
-- $5.6 million Class B-2 at A (sf)
-- $4.3 million Class B-3 at BBB (sf)
-- $2.3 million Class B-4 at BB (sf)
-- $1.1 million Class B-5 at B (sf)

Class A-X-1 is an interest-only certificate. The class balance represents notional amounts.

Classes A-1, A-2, A-7, A-8, A-9 and A-10 are exchangeable certificates. These classes can be exchanged for combinations of exchange notes as specified in the offering documents.

Classes A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9 and A-10 are super senior certificates. These classes benefit from additional protection from the senior support certificates (Class A-11) with respect to loss allocation.

The AAA (sf) ratings on the Certificates reflect 5.85% of credit enhancement provided by subordinated notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 4.25%, 2.70%, 1.50%, 0.85% and 0.55% of credit enhancement, respectively.

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

This securitization is a portfolio of first-lien, fixed-rate, prime residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 509 loans with a total principal balance of $359,840,247 as of the Cut-Off Date (November 1, 2019).

Flagstar Bank, FSB is the Originator and Servicer of all mortgage loans and the Sponsor of the transaction. Wells Fargo Bank, N.A. (rated AA with a Stable trend by DBRS Morningstar) will act as the Master Servicer, Securities Administrator and Custodian. Wilmington Savings Fund Society, FSB will serve as Trustee. PentAlpha Surveillance LLC will act as the Reviewer.

The pool consists of fully amortizing fixed-rate mortgages with original terms to maturity of 30 years. Approximately 21.5% of the pool are agency eligible mortgage loans which were eligible for purchase by Fannie Mae or Freddie Mac.

The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

For this transaction, the servicing fee payable to the Servicer comprises three separate components: the base servicing fee, the aggregate delinquent servicing fee and the aggregate incentive servicing fee. These fees vary based on the delinquency status of the related loan and will be paid from interest collections before distribution to the securities. The base servicing fee will reduce the net weighted-average coupon (WAC) payable to certificateholders as part of the aggregate expense calculation; however, except for the Class B-6-C Net WAC, the delinquent and incentive servicing fees will not be included in the reduction of Net WAC and will thus reduce available funds entitled to the certificateholders. To capture the impact of such potential fees, DBRS Morningstar ran additional cash flow stresses based on its 60+-day delinquency and default curves.

The ratings reflect transactional strengths that include high-quality underlying assets, well-qualified borrowers, structural enhancements and 100% current loans.

This transaction employs a limited third-party due diligence review as well as a representations and warranties (R&Ws) framework that contains certain weaknesses, such as materiality factors, an unrated R&W provider, knowledge qualifiers and sunset provisions that allow for certain R&Ws to expire within three to six years after the Closing Date. DBRS Morningstar perceives the framework as more limiting than 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 presale 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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