DBRS Morningstar Assigns Provisional Ratings to RMF Proprietary Issuance Trust 2021-1

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following Asset-Backed Notes, Series 2021-1, to be issued by RMF Proprietary Issuance Trust 2021-1:

-- $225.3 million Class A at AAA (sf)
-- $10.7 million Class M1 at AA (sf)
-- $5.2 million Class M2 at A (sf)
-- $8.1 million Class M3 at BBB (sf)

The AAA (sf) rating reflects 110.5% of cumulative advance rate. The AA (sf), A (sf), and BBB (sf) ratings reflect 115.8%, 118.3%, and 122.3% of cumulative advance rates, respectively.

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

Lenders typically offer reverse mortgage loans to people who are at least 62 years old. Through reverse mortgage loans, borrowers have access to home equity through a lump sum amount or a stream of payments without periodically repaying principal or interest, allowing the loan balance to accumulate over a period of time until a maturity event occurs. Loan repayment is required (1) if the borrower dies, (2) if the borrower sells the related residence, (3) if the borrower no longer occupies the related residence for a period (usually a year), (4) if it is no longer the borrower’s primary residence, (5) if a tax or insurance default occurs, or (6) if the borrower fails to properly maintain the related residence. In addition, borrowers must be current on any homeowners association dues if applicable. Reverse mortgages are typically nonrecourse; borrowers don’t have to provide additional assets in cases where the outstanding loan amount exceeds the property’s value (the crossover point). As a result, liquidation proceeds will fall below the loan amount in cases where the outstanding balance reaches the crossover point, contributing to higher loss severities for these loans.

As of the March 31, 2021, cut-off date, the collateral has approximately $203.8 million in current unpaid principal balance from 317 performing, nonrecourse, primarily fixed and adjustable-rate jumbo reverse mortgage loans secured by first liens on single-family residential properties, condominiums, multifamily (two- to four-family) properties, and planned-unit developments. The loans were originated between 2019 and 2021.

The transaction uses a structure in which cash distributions are made sequentially to each rated note until the rated amounts with respect to such notes are paid off. No subordinate note shall receive any payments until the balance of senior notes has been reduced to zero, and the subordinate notes will not be eligible for principal payments even if Class A pays off prior to the expected redemption date. As a result, the subordinate classes are initially locked out of cash distribution. Interest is capitalized to the note balances of the Class M notes and the Class A notes, which will accrue cap carryover for any interest shortfalls, except that, with respect to the Class A notes, timely interest payments are expected to be made using the term payment reserve, set-aside reserve, and line of credit reserve accounts in any period in which there are insufficient available funds. In the event that the set-aside reserve account is insufficient, the term payment and line of credit reserve accounts may be used to supplement. These used reserve accounts are replenished with available cash.

For more information regarding rating methodologies and the Coronavirus Disease (COVID-19), please see the following DBRS Morningstar publications: “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: March 2021 Update,” dated March 17, 2021.

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 U.S. dollars unless otherwise noted.

The principal methodology is U.S. Reverse Mortgage Securitization Ratings Methodology (May 8, 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.

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

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