DBRS Morningstar Finalizes Provisional Ratings on New Residential Mortgage Loan Trust 2020-RPL1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following Mortgage-Backed Notes, Series 2020-RPL1 (the Notes) issued by New Residential Mortgage Loan Trust 2020-RPL1 (the Trust):

-- $756.1 million Class A-1 at AAA (sf)
-- $71.3 million Class A-2 at AA (sf)
-- $69.0 million Class M-1 at A (sf)
-- $56.5 million Class M-2 at BBB (sf)
-- $48.7 million Class B-1 at BB (sf)
-- $26.7 million Class B-2 at B (sf)
-- $827.4 million Class A-3 at AA (sf)
-- $896.4 million Class A-4 at A (sf)

Classes A-3 and A-4 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 36.40% of credit enhancement provided by subordinated notes. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 30.40%, 24.60%, 19.85%, 15.75%, and 13.50% of credit enhancement, respectively.

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

This transaction is a securitization of a portfolio of seasoned performing and reperforming first-lien residential mortgages funded by the issuance of mortgage-backed notes (i.e., the Notes). The Notes are backed by 6,884 loans with a total principal balance of $1,188,815,989 as of the Cut-Off Date (December 31, 2019).

The portfolio is approximately 156 months seasoned, and 93.0% of the loans are modified. The modifications happened more than two years ago for 85.6% of the modified loans. Within the pool, 2,393 mortgages have non-interest-bearing deferred amounts, which equate to 7.8% of the total principal balance.

As of the Cut-Off Date, 64.1% of the pool is current, 30.8% is 30 days delinquent, and 2.4% is 60 days delinquent under the Mortgage Bankers Association (MBA) delinquency method. Additionally, 2.8% of the pool is in bankruptcy (all bankruptcy loans are performing 30 days or 60 days delinquent under the MBA delinquency method). Approximately 17.2% and 30.8% of the loans have been zero times 30 days delinquent for at least 12 months and six months, respectively, under the MBA delinquency method. All but 1.2% of the pool is exempt from the Ability-to-Repay/Qualified Mortgage (QM) rules; these loans are designated as Non-QM.

The Seller, NRZ Sponsor VIII LLC (NRZ), acquired the loans in a whole-loan purchase or in connection with the termination of a securitization trust prior to the Closing Date and, through an affiliate, New Residential Funding 2020-RPL1 LLC (the Depositor), will contribute the loans to the Trust. As the Sponsor, New Residential Investment Corp., or a majority-owned affiliate, will acquire and retain a 5.0% eligible vertical interest 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.

The loans will be serviced by NewRez, LLC doing business as (d/b/a) Shellpoint Mortgage Servicing (92.6%), Fay Servicing LLC (7.2%), and Nationstar Mortgage LLC (Nationstar) d/b/a Mr. Cooper Group, Inc. (0.2%). Nationstar will also act as the Master Servicer.

There will not be any advancing of delinquent principal or interest on any mortgages by the servicers or any other party to the transaction; however, the servicers are obligated to make advances with respect to the preservation, inspection, restoration, protection, and repair of a mortgaged property, including delinquent tax and insurance payments, the enforcement or judicial proceedings associated with a mortgage loan, and the management and liquidation of properties (to the extent such advances are deemed recoverable by the related servicer).

NRZ, as the Seller, will have the option to repurchase any loan that becomes 60 days or more 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 10.0% of the principal balance of the mortgage loans as of the Cut-Off Date.

As a loss mitigation alternative, each Servicer has the right to sell (or cause to be sold) mortgage loans that become 60 days or more delinquent under the MBA method to any party in the secondary market in an arms-length transaction at fair market value to maximize proceeds on such loan on a present value basis.

The transaction employs a sequential-pay cash flow structure. Principal proceeds and excess interest can be used to cover interest shortfalls on the Notes, but such shortfalls on Class M-1 and more subordinate bonds will not be paid from principal proceeds until the more senior classes are retired.

The ratings reflect transactional strengths that include a comprehensive due diligence review and structural features.

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.

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 is detailed in the related presale report.

The DBRS Morningstar ratings of AAA (sf) and AA (sf) 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. The DBRS Morningstar ratings of A (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.

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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