DBRS Morningstar Confirms Ratings on Prime Structured Mortgage (PriSM) Trust, Series 2020-1

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Mortgage-Backed Certificates, Series 2020-1 issued by Prime Structured Mortgage (PriSM) Trust (the Issuer) as part of DBRS Morningstar’s continued effort to provide market participants with updates on an annual basis:

-- AAA (sf) on the Mortgage-Backed Certificates, Series 2020-1, Class A (the Class A Certificates)
-- AAA (sf) on the Mortgage-Backed Certificates, Series 2020-1, Class VFC (the Class VFC Certificates)
-- AAA (sf) on the Mortgage-Backed Certificates, Series 2020-1, Class IO (the Class IO Certificates)
-- AA (sf) on the Mortgage-Backed Certificates, Series 2020-1, Class B (the Class B Certificates)
-- AA (low) (sf) on the Mortgage-Backed Certificates, Series 2020-1, Class C (the Class C Certificates)
-- A (high) (sf) on the Mortgage-Backed Certificates, Series 2020-1, Class D (the Class D Certificates)
-- BBB (high) (sf) on the Mortgage-Backed Certificates, Series 2020-1, Class E (the Class E Certificates)
-- BB (low) (sf) on the Mortgage-Backed Certificates, Series 2020-1, Class F (the Class F Certificates; together with the Class A Certificates, the Class VFC Certificates, the Class IO Certificates, the Class B Certificates, the Class C Certificates, the Class D Certificates, and the Class E Certificates, the Rated Certificates)

The ratings on the Class A Certificates, the Class VFC Certificates (together, the Senior Principal Certificates), the Class B Certificates, the Class C Certificates, the Class D Certificates, the Class E Certificates, and the Class F Certificates represent the timely payment of interest to the holders thereof and the ultimate payment of principal by the Rated Final Distribution Date under the respective rating stress. The rating on the Class IO Certificates is an opinion that addresses the likelihood of the Notional Amount of the Class IO Certificates’ applicable reference certificates (i.e., the Senior Principal Certificates) being adversely affected by credit losses.

The Mortgage-Backed Certificates, Series 2020-1, Class G (the Class G Certificates) and Mortgage-Backed Certificates, Series 2020-1, Class R (collectively with the Class G Certificates and the Rated Certificates, the Certificates) are not rated by DBRS Morningstar.

DBRS Morningstar initially published its outlook on the Coronavirus Disease (COVID-19) pandemic’s impact on key economic indicators for the 2020–22 time frame in April 2020. DBRS Morningstar last updated the macroeconomic scenarios on March 17, 2021, in its “Global Macroeconomic Scenarios: March 2021 Update” at https://www.dbrsmorningstar.com/research/375376. For the Rated Certificates, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis. The rating confirmations are based on the following factors:

(1) The collateral comprises a pool of first-lien fixed-rate, B-20 compliant uninsured Canadian residential mortgages with a maximum loan-to-value ratio of 80% at origination. The pool balance has amortized to $583.4 million as of January 2021, representing a pool factor of 84.8%. The pass-through structure of the certificates has resulted in higher subordination across the Rated Certificates.

(2) Credit enhancement provided by subordination has built up since issuance, providing protection to the certificates.

(3) Credit performance since inception has been stable with no reported losses. The transaction benefits from strong asset quality consisting of prime conventional mortgages with high credit scores and low LTV ratios. Losses are allocated to the lowest-ranking Principal Certificates outstanding.

(4) TD Securities Inc. (TDSI), a wholly owned subsidiary of TD Bank, is the Seller and Master Servicer and provides representations and warranties and is ultimately responsible for all the servicing obligations of the mortgages. Both First National Financial LP and CMLS Financial Ltd., acting as Sub-Servicers, have extensive servicing experience in the Canadian residential mortgage market.

The ratings on the Class E Certificates and the Class F Certificates materially deviate from higher ratings implied by the quantitative results. DBRS Morningstar considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted as DBRS Morningstar recognizes the structural subordination of the Class E Certificates to the Class D Certificates and the structural subordination of the Class F Certificates to the Class E Certificates.

DBRS Morningstar monitors the performance of the transaction to identify any deviation from DBRS Morningstar’s expectations at issuance and to ensure the ratings remain appropriate. The review is predicated upon the timely receipt of performance information from the related providers. The performance and characteristics of the pool and the Certificates are available and updated each month in the Monthly Canadian ABS Report.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is the Master Canadian Structured Finance Surveillance Methodology (August 31, 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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