DBRS Morningstar Takes Rating Actions on 66 U.S. RMBS Transactions

DBRS, Inc. (DBRS Morningstar) reviewed 717 classes from 66 U.S. residential mortgage-backed security (RMBS) transactions. Of the 717 classes reviewed, DBRS Morningstar upgraded 81 ratings, confirmed 612 ratings, discontinued 11 ratings, and maintained 13 ratings Under Review with Negative Implications. In addition, of the confirmed ratings, DBRS Morningstar removed 21 from Under Review with Negative Implications.

The rating upgrades reflect positive performance trends and increases in credit support sufficient to withstand stresses at their new rating levels. The rating confirmations reflect asset performance and credit-support levels that are consistent with the current ratings. The discontinued ratings reflect the transactions exercising their cleanup call option or the full repayment of principal to bondholders. The Under Review with Negative Implications status reflects the negative impact of the Coronavirus Disease (COVID-19) pandemic on the bonds. For certain bonds, DBRS Morningstar maintained the Under Review with Negative Implications status amid the uncertainty in such transactions’ performance with respect to forbearance and delinquency trends.

The pools backing the reviewed RMBS transactions consist of alt-A, subprime, second lien, option ARM, seasoned, re-performing (RPL), and non-qualified mortgage (non-QM) collateral.

The ratings assigned to the securities listed below differ from the ratings implied by the quantitative model. DBRS Morningstar considers these differences material deviations; however, in these cases, the ratings on the subject securities may reflect additional seasoning being warranted to substantiate a further upgrade or that the actual deal or tranche performance is not fully reflected in the projected cash flows/model output.

-- Angel Oak Mortgage Trust 2019-3, Mortgage-Backed Certificates, Series 2019-3, Classes M-1 and B-1

-- Angel Oak Mortgage Trust 2019-4, Mortgage-Backed Certificates, Series 2019-4, Class M-1

-- Angel Oak Mortgage Trust 2019-5, Mortgage-Backed Certificates, Series 2019-5, Class M-1

-- Angel Oak Mortgage Trust 2019-6, Mortgage-Backed Certificates, Series 2019-6, Class M-1

-- COLT 2019-4 Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2019-4, Class M-1

-- Galton Funding Mortgage Trust 2020-H1, Mortgage Pass-Through Certificates, Series 2020-H1, Class A3
-- Homeward Opportunities Fund I Trust 2019-3, Mortgage Pass-Through Certificates, Series 2019-3, Class B-1
-- Residential Mortgage Loan Trust 2019-3, Mortgage-Backed Notes, Series 2019-3, Class M-1

-- Residential Mortgage Loan Trust 2020-1, Mortgage-Backed Notes, Series 2020-1, Classes A-3 and M-1

-- Spruce Hill Mortgage Loan Trust 2020-SH1, Mortgage-Backed Notes, Series 2020-SH1, Class M-1

-- Starwood Mortgage Residential Trust 2019-INV1, Mortgage Pass-Through Certificates, Series 2019-INV1, Class A-3

-- Bayview Opportunity Master Fund IVa Trust 2017-RT1, Mortgage-Backed Securities, Series 2017-RT1, Classes B4 and B5

-- Towd Point Mortgage Trust 2018-4, Asset Backed Securities, Series 2018-4, Classes M1, B1, B2, and A4

-- Towd Point Mortgage Trust 2018-5, Asset Backed Securities, Series 2018-5, Classes M2, B1, and B2

-- Towd Point Mortgage Trust 2020-1, Asset-Backed Securities, Series 2020-1, Classes M1, M2, B1A, B1B, B2A, B2B, A5, M1A, M1AX, M1B, M1BX, M2A, M2AX, M2B, M2BX, B1, B1C, B1CX, B1D, B1DX, B1E, B1EX, B1F, B1FX, and B2

-- New Residential Mortgage Loan Trust 2017-2, Mortgage-Backed Notes, Series 2017-2, Classes A-1, A-IO, A-1A, A-1B, A-1C, A1-IOA, A1-IOB, A1-IOC, A-2, A-3, A-4, A-5, A-6, A, B1, B1-IO, B-1A, B-1B, B-1C, B1-IOA, B1-IOB, and B1-IOC

-- New Residential Mortgage Loan Trust 2017-4, Mortgage-Backed Notes, Series 2017-4, Classes A-1, A-IO, A-1A, A-1B, A-1C, A1-IOA, A1-IOB, A-2, A, B-1, B1-IO, B-1A, B-1B, B-1C, B1-IOA, B1-IOB, B1-IOC

CORONAVIRUS DISEASE (COVID-19) IMPACT
The coronavirus pandemic and the resulting isolation measures have caused an immediate economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar saw increases in delinquencies for many RMBS asset classes, shortly after the onset of coronavirus.

Such mortgage delinquencies were mostly in the form of forbearance, which are generally short-term payment reliefs that may perform very differently from traditional delinquencies. At the onset of coronavirus, because the option to forebear mortgage payments was so widely available, it drove forbearance to a very high level. When the dust settled, coronavirus-induced forbearance in 2020 performed better than expected, thanks to government aid and good underwriting in the mortgage market in general. Across nearly all RMBS asset classes, delinquencies have been gradually trending down in recent months as the forbearance period comes to an end for many borrowers.

In connection with the economic stress assumed under its baseline scenario (“Baseline Macroeconomic Scenarios For Rated Sovereigns,” published on September 8, 2021), DBRS Morningstar may assume higher loss expectations for pools with loans on forbearance plans.

When DBRS Morningstar places a rating Under Review with Negative Implications, DBRS Morningstar seeks to complete its assessment and remove the rating from this status as soon as appropriate. Upon the resolution of the Under Review status, DBRS Morningstar may confirm or downgrade the ratings on the affected classes.

ESG CONSIDERATIONS
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.

The rating actions are the result of DBRS Morningstar’s application of its “U.S. RMBS Surveillance Methodology,” published on February 21, 2020.

Notes:
The principal methodologies are the U.S. RMBS Surveillance Methodology (February 21, 2020) and 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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 these credits or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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