DBRS Morningstar Assigns Provisional Ratings to Brean Asset-Backed Securities Trust 2023-RM6

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following Mortgage-Backed Notes, Series 2023-RM6, to be issued by Brean Asset-Backed Securities Trust 2023-RM6 (the Issuer):

-- $129.8 million Class A1 at AAA (sf)
-- $20.0 million Class A2 at AAA (sf)
-- $149.8 million Class AM at AAA (sf)
-- $2.7 million Class M1 at AA (sf)
-- $2.7 million Class M2 at A (sf)
-- $2.1 million Class M3 at BBB (sf)
-- $2.0 million Class M4 at BB (sf)
-- $2.1 million Class M5 at B (sf)

The AAA (sf) rating reflects 109.95% of the cumulative advance rate. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 111.93%, 113.91%, 115.45%, 116.92%, and 118.46%, of cumulative advance rates, respectively.

Other than the specified classes above, DBRS Morningstar did not rate 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 January 10, 2023, cut-off date, the collateral has approximately $136.2 million in current unpaid principal balance from 236 active and two Called Due: Death fixed-rate jumbo reverse mortgage loans secured by first liens on single-family residential properties, condominiums, townhomes, multifamily (two- to four-family) properties, and one manufactured home. The loans were all originated in 2022. All loans in this pool have a fixed interest rate with a 9.222% weighted average coupon.

The note rate for Class A Notes will reduce to 0.25% if the Home Price Percentage (as measured using the Standard and Poor (S&P) CoreLogic Case-Shiller National Index) declines by 30% or more compared with the value on the cut-off date.

If the notes are not paid in full or redeemed by the issuer on January 2028, the Expected Repayment Date, the issuer will be required to conduct an auction within 180 calendar days of the Expected Repayment Date to offer all the mortgage assets and use the proceeds, net of fees and expenses due to auction, to be applied to payments to all amounts owed. If the proceeds of the auction are not sufficient to cover all the amounts owed, the issuer will be required to conduct an auction within six months of the previous auction.

If, on any Payment Date (1) the average one-month conditional prepayment rate over the immediately preceding six month period is equal to or greater than 25%, or (2) if the average per annum increase in the Case-Shiller Index, or, to the extent the Case-Shiller is no longer published, the HPI Index, over the immediately preceding 12-month period is less than or equal to 2% then on such date, 50% of available funds remaining after payment of fees and expenses and interest to the Class A Notes will be deposited into the Refunding Account, which may be used to purchase additional mortgage loans.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the ratings is Rating and Monitoring U.S. Reverse Mortgage Securitizations (November 23, 2022; https://www.dbrsmorningstar.com/research/405660).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022),
https://www.dbrsmorningstar.com/research/402153/interest-rate-stresses-for-us-structured-finance-transactions
-- Legal Criteria for U.S. Structured Finance (December 7, 2022),
https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance
-- Operational Risk Assessment for U.S. RMBS Originators (November 23, 2022),
https://www.dbrsmorningstar.com/research/405664/operational-risk-assessment-for-us-rmbs-originators
-- Operational Risk Assessment for U.S. RMBS Servicers (November 23, 2022),
https://www.dbrsmorningstar.com/research/405665/operational-risk-assessment-for-us-rmbs-servicers

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