DBRS Morningstar Assigns Provisional Ratings to CIM Trust 2023-I2

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following Mortgage Pass-Through Notes, Series 2023-I2 (the Notes) to be issued by CIM Trust 2023-I2 (CIM 2023-I2):

-- $135.2 million Class A-1 at AAA (sf)
-- $25.0 million Class A-2 at AA (sf)
-- $26.5 million Class A-3 at A (sf)
-- $16.0 million Class M-1 at BBB (sf)
-- $12.8 million Class B-1 at BB (sf)
-- $9.9 million Class B-2 at B (sf)

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

The AAA (sf) rating on the Class A-1 Notes reflects 43.30% of credit enhancement provided by subordinate notes. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 32.80%, 21.70%, 15.00%, 9.65%, and 5.50% of credit enhancement, respectively.

This is a securitization of a portfolio of fixed- and adjustable-rate, investor debt service coverage ratio (DSCR), first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 1,023 mortgage loans (representing 1,049 properties) with a total principal balance of $238,530,037 as of the Cut-Off Date.

CIM 2023-I2 represents the third securitization issued from the CIM-I shelf, which is backed by business-purpose investment property loans primarily underwritten using DSCRs. Chimera Investment Corporation serves as the Sponsor of this transaction.

United Wholesale Mortgage, LLC (28.7%), CrossCountry Mortgage, LLC (16.4%), Angel Oak Mortgage Solutions LLC (12.4%), and Finance of America Mortgage LLC (11.2%) are the largest originators in the mortgage pool. The remaining originators each comprise less than 10.0% of the mortgage loans. NewRez LLC doing business as Shellpoint Mortgage Servicing will act as the Servicer for all the loans within the pool. Computershare Trust Company, N.A. (rated BBB with a Stable trend by DBRS Morningstar) will act as the Master Servicer, Paying Agent, Note Registrar, Certificate Registrar, and Custodian.

The mortgage loans were underwritten to program guidelines for business-purpose loans that are designed to rely on property value, the mortgagor’s credit profile, and the DSCR, where applicable. Since the loans were made to investors for business purposes, they are exempt from the Consumer Financial Protection Bureau’s Ability-to-Repay rules and TILA/RESPA Integrated Disclosure rule.

For this transaction, the representations and warranty remedy provider, Chimera Funding TRS LLC (the Remedy Provider), will provide certain representations and warranties as of the Closing Date, while certain other representations and warranties will be provided either (1) as of the date when loan was sold by the originator to the underlying loan seller from which Fifth Avenue Trust (the Seller) acquired the loans or (2) the date on which loans were sold to the Seller. For prior transactions, all the representations and warranties were provided by the Remedy Provider as of the Closing Date.

The Sponsor, or a majority-owned affiliate, will retain an eligible horizontal interest consisting of a portion of the Class B-2 and the Class B-3, B-4, and XS Notes representing at least 5% of the aggregate fair value of the Notes to satisfy the credit risk-retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder. Such retention aligns Sponsor and investor interest in the capital structure.

On or after the earlier of (1) the third anniversary of the Closing Date or (2) the date when the aggregate unpaid principal balance (UPB) of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the holder of the Class XS Notes, at its option, may redeem all of the outstanding Notes at a price equal to the class balances of the related Notes plus accrued and unpaid interest, including any Cap Carryover Amounts, and any non-interest-bearing deferred amounts due to the Class XS Notes (Optional Redemption). An Optional Redemption will be followed by a qualified liquidation.

The Remedy Provider will have the option, but not the obligation, to repurchase any mortgage loan that becomes 90 or more days delinquent under the Mortgage Bankers Association method at the Repurchase Price (par plus interest), provided that such repurchases in aggregate do not exceed 10% of the total principal balance as of the Cut-Off Date.

On any date following the date on which the aggregate UPB of the mortgage loans is less than or equal to 10% of the Cut-Off Date balance, the Depositor will have the option to terminate the transaction by purchasing all of the mortgage loans and any real estate owned (REO) property from the Issuer at a price equal to the sum of the aggregate UPB of the mortgage loans (other than any REO property) plus accrued interest thereon; the lesser of the fair market value of any REO property and the stated principal balance of the related loan; and any outstanding and unreimbursed servicing advances, accrued and unpaid fees, any non-interest-bearing deferred amounts, and expenses that are payable or reimbursable to the transaction parties (Optional Termination). An Optional Termination is conducted as a qualified liquidation.

For this transaction, the Servicer will fund advances of delinquent principal and interest (P&I) until loans become 120 days delinquent or are otherwise deemed unrecoverable. Additionally the Servicer is obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing of properties (servicing advances).

The transaction employs a sequential-pay cash flow structure with a pro rata principal distribution among the senior classes (Classes A-1, A-2, and A-3) subject to certain performance triggers related to cumulative losses or delinquencies exceeding a specified threshold (Credit Event). Prior to a Credit Event, principal proceeds can be used to cover interest shortfalls on Class A-1, A-2, and A-3 before being applied to amortize the balances of the notes. After a Credit Event, principal proceeds can be used to cover interest shortfalls on Classes A-1 and A-2 sequentially (IIPP). For more subordinated Notes, principal proceeds can be used to cover interest shortfalls as the more senior Notes are paid in full.

Excess spread, if available, can be used to cover (1) realized losses and (2) cumulative applied realized loss amounts preceding the allocation of funds to unpaid Cap Carryover Amounts due to Class A-1 down to A-3. In addition, the Class A-1, A-2, and A-3 fixed rates step up by 100 basis points on and after the payment date in July 2027. On or after July 2027, interest and principal otherwise payable to Class B-3 and B-4 interest and principal may be used to pay the Cap Carryover Amounts.

The ratings reflect transactional strengths that include the following:
-- Improved underwriting standards,
-- Certain loan attributes,
-- Robust pool composition,
-- Satisfactory third-party due-diligence review, and
-- Current loans.

The transaction also includes the following challenges:
-- Investor loans,
-- Four-month servicer advances of delinquent P&I, and
-- Representations and warranties framework.

The full description of the strengths, challenges, and mitigating factors is detailed in the related presale report.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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 (May 17, 2022).

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

The principal methodology applicable to the ratings is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (March 3, 2023; https://www.dbrsmorningstar.com/research/410473).

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.

DBRS, Inc.
140 Broadway, 43rd Floor
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.

-- Assessing U.S. RMBS Pools Under the Ability-to-Repay Rules (April 28, 2023),
https://www.dbrsmorningstar.com/research/413297
-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023),
https://www.dbrsmorningstar.com/research/415687/interest-rate-stresses-for-us-structured-finance-transactions
-- Third-Party Due-Diligence Criteria for U.S. RMBS Transactions (September 11, 2020),
https://www.dbrsmorningstar.com/research/366613
-- Representations and Warranties Criteria for U.S. RMBS Transactions (May 16, 2023),
https://www.dbrsmorningstar.com/research/414076
-- Legal Criteria for U.S. Structured Finance (December 7, 2022),
https://www.dbrsmorningstar.com/research/407008
-- Operational Risk Assessment for U.S. RMBS Originators (November 23, 2022),
https://www.dbrsmorningstar.com/research/405664
-- Operational Risk Assessment for U.S. RMBS Servicers (November 23, 2022),
https://www.dbrsmorningstar.com/research/405665

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