DBRS Morningstar Assigns Ratings to Four Cascade Funding Mortgage Trust Transactions

DBRS, Inc. (DBRS Morningstar) assigned ratings to the following four transactions (the Covered Transactions) issued by Cascade Funding Mortgage Trust (CFMT):

CFMT 2018-RM2
-- Mortgage-Backed Securities, Series 2018-RM2, Class A at AAA (sf)
-- Mortgage-Backed Securities, Series 2018-RM2, Class B at AA (high) (sf)
-- Mortgage-Backed Securities, Series 2018-RM2, Class C at A (high) (sf)
-- Mortgage-Backed Securities, Series 2018-RM2, Class D at BBB (low) (sf)
-- Mortgage-Backed Securities, Series 2018-RM2, Class E at BB (high) (sf)
-- Mortgage-Backed Securities, Series 2018-RM2, Class F at B (high) (sf)

CFMT 2019-RM3
-- Mortgage-Backed Notes, Series 2019-RM3, Class A at AAA (sf)
-- Mortgage-Backed Notes, Series 2019-RM3, Class B at AA (sf)
-- Mortgage-Backed Notes, Series 2019-RM3, Class C at A (sf)
-- Mortgage-Backed Notes, Series 2019-RM3, Class D at BBB (sf)
-- Mortgage-Backed Notes, Series 2019-RM3, Class E at BB (high) (sf)
-- Mortgage-Backed Notes, Series 2019-RM3, Class F at BB (low) (sf)

CFMT 2019-HB1, LLC
-- Asset-Backed Notes, Series 2019-1, Class A at AAA (sf)
-- Asset-Backed Notes, Series 2019-1, Class M1 at AA (sf)
-- Asset-Backed Notes, Series 2019-1, Class M2 at A (sf)
-- Asset-Backed Notes, Series 2019-1, Class M3 at BBB (sf)
-- Asset-Backed Notes, Series 2019-1, Class M4 at BB (sf)

CFMT 2020-HB2, LLC
-- Asset-Backed Notes, Series 2020-1, Class A at AAA (sf)
-- Asset-Backed Notes, Series 2020-1, Class M1 at AA (sf)
-- Asset-Backed Notes, Series 2020-1, Class M2 at A (sf)
-- Asset-Backed Notes, Series 2020-1, Class M3 at BBB (sf)
-- Asset-Backed Notes, Series 2020-1, Class M4 at BB (sf)

These securities are currently also rated by DBRS Morningstar’s affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these securities Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about June 15, 2020. In accordance with MCR’s engagement letter covering these securities, upon withdrawal of MCR’s outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. Information about the MCR ratings, including the history of the MCR ratings, can be found at https://ratingagency.morningstar.com/mcr.

The Covered Transactions are classified as reverse mortgage transactions.

As stated in its May 8, 2020, press release, “DBRS and Morningstar Credit Ratings Confirm U.S. Reverse Mortgage Asset Class Coverage,” DBRS Morningstar applied MCR’s “U.S. Reverse Mortgage Securitization Ratings Methodology” to assign these ratings.

DBRS Morningstar’s ratings are based on the following analytical considerations:
-- DBRS Morningstar reviewed MCR’s rating analysis on the Covered Transactions on or prior to the closing dates, including the collateral pool, cash flow analysis, legal review, operational risk review, third-party due diligence, and representations and warranties (R&W) framework.

-- DBRS Morningstar notes that MCR and/or its external counsel had performed a legal analysis, which included but was not limited to legal opinions and various transaction documents as part of its process of assigning ratings to the Covered Transactions on or prior to the closing dates. For the purpose of assigning new ratings to the Covered Transactions, DBRS Morningstar did not perform additional legal analysis unless otherwise indicated in this press release.

-- DBRS Morningstar relied on MCR’s operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable.

-- DBRS Morningstar reviewed key transaction performance indicators, as applicable, since the closing dates as reflected in bond factors, advance rates or credit enhancements, defaults, and cumulative losses.

RATING AND CASH FLOW ANALYSIS
DBRS Morningstar reviewed MCR’s rating analysis on the Covered Transactions, which utilized the Morningstar Iterative Reverse Mortgage Model – Performing Loans to generate loan-level cash flows for the Covered Transactions. The analytics included stressing prepayments (mobility, morbidity, and refinance rates), default rates, mortality rates, home prices, interest rates, draw rates, payment and foreclosure timelines, and foreclosure costs in accordance with MCR’s “U.S. Reverse Mortgage Securitization Ratings Methodology.”

OPERATIONAL RISK REVIEW
DBRS Morningstar relied on MCR’s operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable.

HISTORICAL PERFORMANCE
DBRS Morningstar reviewed the historical performance of the Covered Transactions as reflected in bond factors, advance rates or credit enhancements, defaults, and cumulative losses, and deemed the transaction performance to be satisfactory.

THIRD-PARTY DUE DILIGENCE
A third-party review firm, AMC Diligence, LLC (the TPR firm), performed a due diligence review of the Covered Transactions. DBRS Morningstar conducted a review of the TPR firm and believes that the company has adequate staffing, infrastructure, and capabilities to effectively perform residential mortgage due diligence reviews. The scope of the due diligence review generally included an asset review and a valuation review. DBRS Morningstar also relied on the written attestation the TPR firm provided to MCR on or prior to the closing dates.

R&W FRAMEWORK
DBRS Morningstar conducted a review of the R&W framework for the Covered Transactions. The review covered key considerations, such as the R&W provider, controlling holder, enforcement mechanism, breach reviewer, remedy, and dispute resolution.

CORONAVIRUS DISEASE (COVID-19) ANALYSIS
To reflect the current concerns and conditions surrounding the coronavirus pandemic, DBRS Morningstar tested the following additional sensitivities for reverse mortgage transactions to reflect the moderate macroeconomic scenario outlined in its commentary, “Global Macroeconomic Scenarios: June Update,” published on June 1, 2020:
-- Mortality (higher mortality curve assumptions to account for the increased death rate posed by the coronavirus to the U.S. population older than 65 years of age);
-- Foreclosure (increased foreclosure timeline); and
-- Home prices (additional property valuation haircut to account for the potential decline in broader asset markets).

The ratings DBRS Morningstar assigned to the Covered Transactions were able to withstand the additional coronavirus assumptions with minimal to no rating volatilities.

SUMMARY
The ratings are a result of DBRS Morningstar’s application of MCR’s “U.S. Reverse Mortgage Securitization Ratings Methodology” unless otherwise indicated in this press release.

DBRS Morningstar’s ratings in the highest and second-highest rating categories 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 securities. For all other ratings, DBRS Morningstar’s ratings 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 securities.

The ratings DBRS Morningstar assigned to certain securities may differ from the ratings implied by the quantitative model, but no such difference constitutes a material deviation. When assigning the ratings, DBRS Morningstar considered the rating analysis detailed in this press release and may have made qualitative adjustments for the analytical considerations that are not fully captured by the quantitative model.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

Notes:
The principal methodology is the U.S. Reverse Mortgage Securitization Ratings Methodology (May 8, 2020), which can be found on www.dbrsmorningstar.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.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrs.com.

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