DBRS Morningstar Confirms Ratings of Fortified Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings of all the outstanding Real Estate Secured Line of Credit-Backed notes (the Notes) issued by Fortified Trust as part of DBRS Morningstar’s continued efforts to provide timely credit rating opinions and increased transparency to market participants:

-- Class A Notes, Series 2016-1 at AAA (sf)
-- Class B Notes, Series 2016-1 at AA (high) (sf)
-- Class C Notes, Series 2016-1 at A (high) (sf)

-- Class A Notes, Series 2019-1 at AAA (sf)
-- Class B Notes, Series 2019-1 at AA (high) (sf)
-- Class C Notes, Series 2019-1 at A (high) (sf)

-- Class A Notes, Series 2019-2 at AAA (sf) (together with Class A Notes, Series 2016-1 and the Class A Notes, Series 2019-1, the Class A Notes);
-- Class B Notes, Series 2019-2 at AA (high) (sf) (together with Class B Notes, Series 2016-1 and the Class B Notes, Series 2019-1, the Class B Notes); and
-- Class C Notes, Series 2019-2 at A (high) (sf) (together with the Class C Notes, Series 2016-1 and the Class C Notes, Series 2019-1, the Class C Notes).

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 June 18, 2021, in its “Global Macroeconomic Scenarios: June 2021 Update” at https://www.dbrsmorningstar.com/research/380281. For the Notes, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis. The rating actions are based on the following factors as of May 2021:

(1) The levels of credit enhancement provided by subordination (3.9% and 1.9% for the Class A Notes and Class B Notes, respectively), the Cash Reserve Account with a current balance of zero, and current excess spread of 1.55% for the Series 2016-1 Notes and 1.33% for the Series 2019-1 Notes, and the Series 2019-2 Notes annually. The Cash Reserve Account can build up to 1.35% minus the three-month excess spread if the three-month excess spread falls below 0.95%.

(2) Performance of the underlying collateral remains stable and within expectations, with the monthly payment rate standing at 4.35%. The three-month average net loss ratio remains low at 2 bps as of May 2021.

(3) The Notes benefit from several structural elements typically found in securitizations in Canada that mitigate default risk and the risks related to the credit deterioration of associated counterparties.

(4) The assets in the pool comprise a well-diversified portfolio of home equity line of credit (HELOC) accounts with a minimum of 20% equity in each of the mortgaged properties, which secures the HELOC accounts.

The Bank of Montreal (BMO) is the servicer of the assets in the collateral pool. BMO is one of Canada’s largest banks by assets and is currently rated AA/R-1 (high) by DBRS Morningstar.

The performance and characteristics of the collateral pool and the Notes are available and updated each month in the Monthly Canadian ABS Report available at www.dbrsmorningstar.com.

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:
The principal methodology is Master Canadian Structured Finance Surveillance Methodology (June 7, 2021), 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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