DBRS Morningstar Places One Class of Ready Capital Mortgage Financing 2022-FL9, LLC Under Review with Negative Implications

DBRS, Inc. (DBRS Morningstar) placed the following class of Ready Capital Mortgage Financing 2022-FL9, LLC Under Review with Negative Implications:

-- Class G Notes rated B (low) (sf)

The Under Review with Negative Implications designation on the Class G Notes is the result of accumulated interest shortfalls, which have persisted for more than six consecutive months. As per DBRS Morningstar’s Structured Finance and Covered Bonds Ratings Committee Global Procedure dated October 2022, the tolerance threshold for a DBRS Morningstar credit rating in the BB or B rating category is six months. The shortfalls stem from the difference in the floating interest rate benchmark between the bonds and some of the individual loans remaining in the transaction. While cumulative interest shortfalls totaling $1.8 million remain outstanding on the Class G Notes, interest shortfalls are beginning to be recouped as the benchmark rate on the remaining loans is beginning to transition to the Secured Overnight Financing Rate, the same benchmark rate on the rated bonds. As of March 2023 reporting, prior cumulative interest shortfalls on the Class F Notes were repaid, with funds now being applied to the cumulative shortfalls on the Class G Notes. While DBRS Morningstar believes the interest shortfalls on the Class G Notes will ultimately be repaid, provided there are no future appraisal reductions stemming from defaulted loans, it is possible that shortfalls on the Class G Notes will remain outstanding beyond 90 days henceforth.

ENVIRONMENTAL, SOCIAL, 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).

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

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

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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.

The rating was initiated at the request of the rated entity. The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action. This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

This rating is Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

DBRS, Inc.
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Tel. +1 312 332-3429

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.