DBRS Morningstar Assigns Provisional Ratings to CIM Trust 2020-J2

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Mortgage Pass-Through Certificates, Series 2020-J2 (the Certificates) to be issued by CIM Trust 2020-J2:

-- $278.3 million Class A-1 at AAA (sf)
-- $278.3 million Class A-2 at AAA (sf)
-- $278.3 million Class A-3 at AAA (sf)
-- $208.7 million Class A-4 at AAA (sf)
-- $208.7 million Class A-5 at AAA (sf)
-- $208.7 million Class A-6 at AAA (sf)
-- $69.6 million Class A-7 at AAA (sf)
-- $69.6 million Class A-8 at AAA (sf)
-- $69.6 million Class A-9 at AAA (sf)
-- $222.6 million Class A-10 at AAA (sf)
-- $222.6 million Class A-11 at AAA (sf)
-- $222.6 million Class A-12 at AAA (sf)
-- $55.7 million Class A-13 at AAA (sf)
-- $55.7 million Class A-14 at AAA (sf)
-- $55.7 million Class A-15 at AAA (sf)
-- $13.9 million Class A-16 at AAA (sf)
-- $13.9 million Class A-17 at AAA (sf)
-- $13.9 million Class A-18 at AAA (sf)
-- $34.4 million Class A-19 at AAA (sf)
-- $34.4 million Class A-20 at AAA (sf)
-- $34.4 million Class A-21 at AAA (sf)
-- $312.6 million Class A-22 at AAA (sf)
-- $312.6 million Class A-23 at AAA (sf)
-- $312.6 million Class A-24 at AAA (sf)
-- $312.6 million Class A-IO1 at AAA (sf)
-- $278.3 million Class A-IO2 at AAA (sf)
-- $278.3 million Class A-IO3 at AAA (sf)
-- $278.3 million Class A-IO4 at AAA (sf)
-- $208.7 million Class A-IO5 at AAA (sf)
-- $208.7 million Class A-IO6 at AAA (sf)
-- $208.7 million Class A-IO7 at AAA (sf)
-- $69.6 million Class A-IO8 at AAA (sf)
-- $69.6 million Class A-IO9 at AAA (sf)
-- $69.6 million Class A-IO10 at AAA (sf)
-- $222.6 million Class A-IO11 at AAA (sf)
-- $222.6 million Class A-IO12 at AAA (sf)
-- $222.6 million Class A-IO13 at AAA (sf)
-- $55.7 million Class A-IO14 at AAA (sf)
-- $55.7 million Class A-IO15 at AAA (sf)
-- $55.7 million Class A-IO16 at AAA (sf)
-- $13.9 million Class A-IO17 at AAA (sf)
-- $13.9 million Class A-IO18 at AAA (sf)
-- $13.9 million Class A-IO19 at AAA (sf)
-- $34.4 million Class A-IO20 at AAA (sf)
-- $34.4 million Class A-IO21 at AAA (sf)
-- $34.4 million Class A-IO22 at AAA (sf)
-- $312.6 million Class A-IO23 at AAA (sf)
-- $312.6 million Class A-IO24 at AAA (sf)
-- $312.6 million Class A-IO25 at AAA (sf)
-- $5.6 million Class B-1 at AA (sf)
-- $5.6 million Class B-IO1 at AA (sf)
-- $5.6 million Class B-1A at AA (sf)
-- $3.9 million Class B-2 at A (sf)
-- $3.9 million Class B-IO2 at A (sf)
-- $3.9 million Class B-2A at A (sf)
-- $2.6 million Class B-3 at BBB (sf)
-- $982.0 thousand Class B-4 at BB (sf)
-- $328.0 thousand Class B-5 at B (sf)

Classes A-IO1, A-IO2, A-IO3, A-IO4, A-IO5, A-IO6, A-IO7, A-IO8, A-IO9, A-IO10, A-IO11, A-IO12, A-IO13, A-IO14, A-IO15, A-IO16, A-IO17, A-IO18, A-IO19, A-IO20, A-IO21, A-IO22, A-IO23, A-IO24, A-IO25, B-IO1, and B-IO2 are interest-only certificates. The class balance represents notional amounts.

Classes A-1, A-2, A-3, A-4, A-5, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-16, A-17, A-19, A-20, A-22, A-23, A-24, A-IO2, A-IO3, A-IO4, A-IO5, A-IO8, A-IO9, A-IO10, A-IO11, A-IO12, A-IO13, A-IO14, A-IO17, A-IO20, A-IO23, A-IO24, A-IO25, B-1, and B-2 are exchangeable certificates. These classes can be exchanged for combinations of initial exchangeable certificates as specified in the offering documents.

Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-15, A-16, A-17, and A-18 are super-senior certificates. These classes benefit from additional protection from senior support certificates (Classes A-19, A-20, and A-21) with respect to loss allocation.

The AAA (sf) ratings on the Certificates reflect 4.50% of credit enhancement provided by subordinated certificates. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 2.80%, 1.60%, 0.80%, 0.50%, and 0.40% of credit enhancement, respectively.

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

This securitization is a portfolio of first-lien, fixed-rate, prime residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 359 loans with a total principal balance of $327,361,523 as of the Cut-Off Date (December 1, 2020).

The originators for the aggregate mortgage pool are Guaranteed Rate, Inc. (31.3%) and Guaranteed Rate Affinity, LLC (4.0%) (collectively known as Guaranteed Rate Companies); Fairway Independent Mortgage Corporation (20.4%); PrimeLending (15.3%); and various other originators, each comprising no more than 15.0% of the pool by principal balance. On the Closing Date, the Seller, Fifth Avenue Trust, will acquire the mortgage loans from Bank of America, N.A. (BANA; rated AA (low) with a Stable trend by DBRS Morningstar).

Through bulk purchases, BANA generally acquired the mortgage loans underwritten to
-- Its jumbo whole loan acquisition guidelines (96.0%),
-- Fannie Mae or Freddie Mac’s Automated Underwriting System (AUS; 2.3%), or
-- The related originator's guidelines (1.7%).

DBRS Morningstar conducted an operational risk assessment on BANA’s aggregator platform, as well as certain originators, and deemed them acceptable.

NewRez LLC doing business as Shellpoint Mortgage Servicing will service 100% of the mortgage loans, directly or through subservicers. Wells Fargo Bank, N.A. (rated AA with a Negative trend by DBRS Morningstar) will act as Master Servicer, Securities Administrator, and Custodian. Wilmington Savings Fund Society, FSB will serve as Trustee. Chimera Funding TRS LLC will serve as the Representations and Warranties (R&W) Provider.

The holder of a majority of the most subordinate class of subordinate Certificates (other than any interest-only Certificates) then outstanding (the Controlling Holder) has the option to engage, at its own expense, an asset manager to review the Servicer’s actions regarding the mortgage loans, which includes determining whether the Servicer is making modifications or servicing the loans in accordance with the pooling and servicing agreement.

For this transaction, as permitted by the Coronavirus Aid, Relief, and Economic Security Act, signed into law on March 27, 2020, 13 loans (2.5% of the pool) had been granted forbearance plans because the borrowers reported financial hardship related to the Coronavirus Disease (COVID-19) pandemic. Additionally, two loans (0.4% of the pool) requested a forbearance plan but later withdrew the request. These forbearance plans allow temporary payment holidays, followed by repayment once the forbearance period ends. As of December 4, 2020 all 13 loans satisfied their forbearance plans and are current. Furthermore, none of the loans in the pool are on active coronavirus-related forbearance plans.

The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

Coronavirus Pandemic Impact
The coronavirus pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to rise in the coming months for many residential mortgage-backed securities (RMBS) asset classes, some meaningfully.

The prime mortgage sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans originated to borrowers with prime credit. Generally, these borrowers have decent FICO scores, reasonable equity, and robust income and liquid reserves.

As a result of the coronavirus, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers’ ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans.

In connection with the economic stress assumed under its moderate scenario (see “Global Macroeconomic Scenarios: December Update,” published on December 2, 2020), for the prime asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than it previously used. DBRS Morningstar derives such MVD assumptions through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement.

In the prime asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes that this sector should have low intrinsic credit risk. Within the prime asset class, loans originated to (1) self-employed borrowers or (2) higher loan-to-value (LTV) ratio borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy.

For more information regarding rating methodologies and the coronavirus, please see the following DBRS Morningstar press releases and commentary: "DBRS Morningstar Provides Update on Rating Methodologies in Light of Measures to Contain Coronavirus Disease (COVID-19)," dated March 12, 2020; "DBRS Morningstar Global Structured Finance Rating Methodologies and Coronavirus Disease (COVID-19)," dated March 20, 2020; and “Global Macroeconomic Scenarios: December Update,” dated December 2, 2020.

The ratings reflect transactional strengths that include the following:
-- High-quality credit attributes,
-- Well-qualified borrowers,
-- Satisfactory third-party due-diligence review,
-- Structural enhancements, and
-- 100% current loans.

The transaction also includes the following challenges:
-- R&W framework,
-- Entities lack financial strength or securitization history,
-- Servicer’s financial capabilities, and
-- Borrowers on forbearance plans.

The full description of the strengths, challenges, and mitigating factors is detailed in the related presale report.

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:
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 (April 1, 2020), which can be found on 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.

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.dbrsmorningstar.com or contact us at [email protected].

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