DBRS Morningstar Assigns Provisional Ratings to CIM Trust 2020-R2

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Mortgage-Backed Notes, Series 2020-R2 (the Notes) to be issued by CIM Trust 2020-R2 (CIM 2020-R2 or the Trust):

-- $351.9 million Class A1 at AAA (sf)
-- $299.1 million Class A1-A at AAA (sf)
-- $52.8 million Class A1-B at AAA (sf)
-- $351.9 million Class A1-IO at AAA (sf)
-- $32.9 million Class M1 at AA (sf)
-- $32.9 million Class M1-IO at AA (sf)

Classes A1-IO and M1-IO are interest-only notes. The class balances represent notional amounts.

Class A1 is an exchangeable note. This class can be exchanged for a combination of exchanged notes (Classes A1-A and A1-B) as specified in the offering documents.

The AAA (sf) rating on the Class A1 Notes reflects 28.35% of credit enhancement provided by subordinated Notes in the transaction. The AA (sf) rating reflects 21.65% of credit enhancement.

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 primarily seasoned performing and reperforming first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 2,250 loans with a total principal balance of $492,346,827 as of the Cut-Off Date (February 29, 2020).

The loans are approximately 160 months seasoned. As of the Cut-Off Date, 97.6% of the pool is current, 1.4% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method, and 1.0% is in bankruptcy. Approximately 93.5% and 82.9% of the mortgage loans have been zero times 30 days delinquent for the past 12 months and 24 months, respectively, under the MBA delinquency method.

Of the portfolio, 94.7% of the loans are modified. The modifications happened more than two years ago for 91.4% of the modified loans. Within the pool, 467 mortgages have non-interest-bearing deferred amounts, which equates to 8.4% of the total principal balance. Included in the deferred amounts are proprietary principal forgiveness and Home Affordable Modification Program principal reduction alternative (PRA) amounts (collectively, the PRA amounts), which comprise approximately 0.2% of the total principal balance. Unless specified otherwise, all the statistics regarding the mortgage loans in this report are based on the current balance including the applicable non-interest-bearing deferred and PRA amounts.

None of the loans in the pool are subject to the Ability to Repay/Qualified Mortgage rules.

Fifth Avenue Trust (the Seller) acquired the majority of the loans in January 2020 and, through a wholly owned subsidiary, Funding Depositor LLC (the Depositor), will contribute loans to the Trust. As the Sponsor, Chimera Investment Corporation (Chimera) or one of its majority-owned affiliates will acquire and retain a 5% eligible horizontal residual interest in the Notes, consisting of the Class B2, B3, and C Notes in the aggregate, to satisfy the credit risk retention requirements. The loans were originated and previously serviced by various entities through purchases in the secondary market. As of the Cut-Off Date, the loans are serviced by Select Portfolio Servicing Inc..

Prior to CIM 2020-R2, Chimera had issued 29 securitizations under the CIM shelf since 2014, backed by seasoned, subprime, reperforming, or nonperforming loans. Only three of the previously issued CIM deals were rated by DBRS Morningstar. DBRS Morningstar reviewed the historical performance of both the rated and unrated transactions issued under the CIM shelf, particularly with respect to the reperforming transactions, which may or may not have collateral attributes similar to CIM 2020-R2. The reperforming CIM transactions generally have delinquencies and losses in line with expectations for previously distressed assets.

There will not be any advancing of delinquent principal or interest on any mortgages by the servicer or any other party to the transaction; however, the servicer is obligated to make advances in respect of homeowner association fees, taxes, and insurance as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.

On or after the Payment Date when the aggregate note amount of the offered Notes is reduced to 10.0% of the Closing Date note amount, the Call Option Holder (the Depositor or any successor or assignee) has the option to purchase all of the mortgage loans and any real estate owned (REO) properties at a certain purchase price equal to the unpaid principal balance of the mortgage loans, plus the fair market value of the REO properties and any unpaid expenses and reimbursement amounts.

The transaction employs a sequential-pay cash flow structure, and principal proceeds can be used to cover interest shortfalls on the Class A1, A1-IO, M1, and M1-IO Notes.

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 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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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