DBRS Morningstar Finalizes Provisional Ratings on Ajax Mortgage Loan Trust 2019-F

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following Mortgage-Backed Securities, Series 2019-F (the Notes) issued by Ajax Mortgage Loan Trust 2019-F (AJAX 2019-F or the Trust):

-- $110.1 million Class A-1 at AAA (sf)
-- $12.5 million Class A-2 at A (high) (sf)
-- $5.1 million Class A-3 at A (low) (sf)
-- $6.1 million Class M-1 at BBB (sf)
-- $11.5 million Class B-1 at BB (sf)
-- $10.4 million Class B-2 at B (sf)

The AAA (sf) rating on the Notes reflects the 35.55% of credit enhancement provided by subordinated Notes in the pool. The A (high) (sf), A (low) (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 28.25%, 25.25%, 21.70 %, 14.95% and 8.85% of credit enhancement, respectively.

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

The transaction is a securitization of a portfolio of seasoned performing and re-performing first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 923 loans with a total principal balance of approximately $170,800,620 as of the Cut-Off Date (October 31, 2019).

The portfolio is approximately 150 months seasoned. As of the Cut-Off Date, under the Mortgage Bankers Association delinquency method, 72.9% of the pool is current, 19.0% is 30-59 days delinquent, 4.7% is 60-89 days delinquent, 1.8% is 90+ days delinquent and 1.5% is in bankruptcy.

Although the number of months clean (consecutively zero times 30 days delinquent) at issuance is weaker relative to other DBRS Morningstar-rated seasoned transactions, the borrowers in this pool demonstrate reasonable cash flow velocity (as measured by number of payments over time) in the past 24 months. Approximately 28.7% of the pool has been clean for the past 24 months; however, 84.5% of the pool has made 24 or more payments in the past 24 months.

Modified loans comprise 83.7% of the portfolio. The modifications happened more than two years ago for 86.3% of the modified loans. Within the pool, 247 mortgages (31.9% of the pool) have non-interest-bearing deferred amounts, which equate to 4.4% of the total principal balance. Included in the deferred amounts are Home Affordable Modification Program and proprietary principal forgiveness amounts, which comprise less than 0.1% of the total principal balance.

Prior to the Closing Date, Great Ajax Operating Partnership LP (Ajax), in its capacity as the Sponsor, acquired some loans from various unaffiliated third-party sellers between 2014 and 2019. On the Closing Date, Ajax will also acquire other loans directly or indirectly as a result of the redemption of all or certain classes of notes that were previously issued by Ajax Mortgage Loan Trust 2017-A. To satisfy the credit risk retention requirements, the Sponsor or a majority-owned affiliate of the Sponsor will retain at least a 5% eligible horizontal interest in the securities.

Since 2013, Ajax and its affiliates have issued 29 securitizations under the Ajax Mortgage Loan Trust shelf prior to AJAX 2019-F. These issuances were backed by seasoned, re-performing or non-performing loans. Two of the previously issued Ajax deals, Ajax Mortgage Loan Trust 2017-B and Ajax Mortgage Loan Trust 2019-D, were rated by DBRS Morningstar. DBRS Morningstar reviewed the historical performance of the Ajax shelf; however, the non-rated deals generally exhibit much worse collateral attributes than the rated deals with regard to delinquencies at issuance. The prior Ajax transactions currently exhibit high levels of delinquencies and losses, which are expected given the nature of these severely distressed assets.

As of the Cut-Off Date, Gregory Funding LLC is the Servicer for all the loans in the pool. There will not be advancing of delinquent principal or interest on the mortgage loans by the Servicer or any other party to the transaction; however, the Servicer is obligated to make advances in respect of real estate assessments, taxes and insurance and reasonable costs and expenses incurred in the course of servicing and disposing of properties.

Beginning three years after the Closing Date, the Issuer, at the direction of the Depositor, has the option to redeem all of the Notes at a price equal to the remaining amount of the Notes plus accrued and unpaid interest and any unpaid expenses and reimbursement amounts (Aggregate Redemption Price). Additionally, beginning three years after the Closing Date, the Issuer, at the direction of the Depositor, has the option to redeem one or more of the most senior Notes outstanding at a price (Class Redemption Price) for each class equal to the sum of the remaining note amount of such class and any accrued and unpaid interest due through the redemption date. Beginning two years after the closing date, when the rated Notes are outstanding, the Issuer has the option to sell any mortgage loan to an affiliate or non-affiliate provided that the proceeds of such sale are equal to the aggregate outstanding note amount of the rated Notes.

The transaction employs a sequential-pay cash flow structure. Principal proceeds can be used to pay interest and Cap Carryover Amounts on the Notes, but such interest and Cap Carryover Amounts on Class A-2 and more subordinate bonds will not be paid until the more senior classes are retired. In addition, unique to this transaction, the senior and mezzanine classes are entitled to Step-Up Interest Payments, beginning seven years from the Closing Date.

The DBRS Morningstar rating of AAA (sf) addresses 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. The DBRS Morningstar ratings of A (high) (sf), A (low) (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 Notes.

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].

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA