DBRS Morningstar Finalizes Provisional Ratings on Residential Mortgage Loan Trust 2020-1

DBRS, Inc. (DBRS Morningstar) finalized the following provisional ratings on the Mortgage-Backed Notes, Series 2020-1 (the Notes) issued by Residential Mortgage Loan Trust 2020-1:

-- $170.7 million Class A-1 at AAA (sf)
-- $15.7 million Class A-2 at AA (sf)
-- $28.1 million Class A-3 at A (sf)
-- $17.0 million Class M-1 at BBB (sf)
-- $14.4 million Class B-1 at BB (sf)
-- $9.7 million Class B-2 at B (sf)

The AAA (sf) ratings on the Certificates reflect 34.75% of credit enhancement provided by subordinated certificates in the pool. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 28.75%, 18.00%, 11.50%, 6.00%, and 2.30% 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 fixed- and adjustable-rate expanded prime and nonprime primarily first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 588 mortgage loans with a total principal balance of $261,594,848 as of the Cut-Off Date (January 1, 2019).

The originators for the mortgage pool are Greenbox Loans, Inc. (45.2%); HomeXpress Mortgage Corp. (28.2%); Athas Capital Group, Inc. (16.1%); and other originators comprising 10.5% of the mortgage loans. The Servicer of the loans is Servis One, Inc. doing business as BSI Financial Services.

Although the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau’s Qualified Mortgage (QM) and Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government, or private-label nonagency prime jumbo products for various reasons. In accordance with the QM/ATR rules, 70.0% of the loans are designated as Non-QM, 0.1% as QM Safe Harbor, and 0.1% as QM Rebuttable Presumption. Approximately 29.8% of the loans are made to investors for business purposes and, hence, are not subject to the QM/ATR rules.

The Sponsor, directly or indirectly through a majority-owned affiliate, will retain an eligible horizontal residual interest consisting of the Class B-3 and Class XS Notes representing at least 5% of the Notes to satisfy the credit risk-retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder.

On or after the earlier of (1) the payment date occurring in January 2023 or (2) the date when the aggregate stated principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Administrator, at the Issuer’s option, may redeem all of the outstanding Notes at a price equal to the class balances of the related Notes plus accrued and unpaid interest, including any cap carryover amounts. After such purchase, the Depositor must complete a qualified liquidation, which requires (1) a complete liquidation of assets within the Trust and (2) proceeds to be distributed to the appropriate holders of regular or residual interests.

The Representation Provider will have the option, but not the obligation, to repurchase any mortgage loan that becomes 90 or more days delinquent at the repurchase price (par plus interest), provided that such repurchases in aggregate do not exceed 10% of the total principal balance as of the Cut-Off Date.

The Servicer will fund advances of delinquent principal and interest on any mortgage until such loan becomes 180 days delinquent. The Servicer is also obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing of properties.

The transaction employs a sequential-pay cash flow structure with a pro rata principal distribution among the senior tranches. Principal proceeds can be used to cover interest shortfalls on the Notes as the outstanding senior Notes are paid in full. Furthermore, excess spread can be used to cover realized losses first before being allocated to unpaid cap carryover amounts up to Class B-2.

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.

The ratings reflect transactional strengths that include the following:

-- Robust loan attributes and pool composition,
-- Satisfactory third-party due diligence review,
-- Improved underwriting standards,
-- Compliance with the ATR rules, and
-- Current loans and faster prepayments.

The transaction also includes the following challenges:

-- Representations and warranties framework,
-- Nonprime, Non-QM, and investor loans,
-- Limited Servicer advances of delinquent principal and interest, and
-- Servicer’s financial capability.

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].

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