DBRS Morningstar Assigns Ratings to GS Mortgage-Backed Securities Trust 2023-RPL2

DBRS, Inc. (DBRS Morningstar) assigned ratings to the Mortgaged-Backed Securities, Series 2023-RPL2 (the Notes) to be issued by GS Mortgage-Backed Securities Trust 2023-RPL2 (GSMBS 2023-RPL2 or the Trust) as follows:

-- $282.7 million Class A-1 at AAA (sf)
-- $26.8 million Class A-2 at AA (high) (sf)
-- $309.5 million Class A-3 at AA (high) (sf)
-- $330.3 million Class A-4 at A (high) (sf)
-- $346.1 million Class A-5 at BBB (high) (sf)
-- $20.8 million Class M-1 at A (high) (sf)
-- $15.8 million Class M-2 at BBB (high) (sf)
-- $9.3 million Class B-1 at BB (high) (sf)
-- $6.7 million Class B-2 at B (high) (sf)
-- $7.7 million Class B-3 at B (low) (sf)

The Class A-3, Class A-4, and Class A-5 Notes are exchangeable. These classes can be exchanged for combinations of initial exchangeable notes as specified in the offering documents.

The AAA (sf) rating on the Notes reflects 26.65% of credit enhancement provided by subordinated notes. The AA (high) (sf), A (high) (sf), BBB (high) (sf), BB (high) (sf), B (high) (sf), and B (low) (sf) ratings reflect 19.70%, 14.30%, 10.20%, 7.80%, 6.05%, and 4.05% of credit enhancement, respectively.

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

The Trust is a securitization of a portfolio of seasoned performing and reperforming, primarily first-lien residential mortgages funded by the issuance of mortgage-backed notes (the Notes). The Notes are backed by 2,299 loans with a total principal balance of $405,676,502 as of the Cut-Off Date (July 31, 2023).

The portfolio is approximately 177 months seasoned and contains 75.8% modified loans. The modifications happened more than two years ago for 76.5% of the modified loans. Within the pool, 733 mortgages have non-interest-bearing deferred amounts, which equate to approximately 6.8% of the total principal balance. There are no Government-Sponsored Enterprise Home Affordable Modification Program or proprietary principal forgiveness amounts included in the deferred amounts.

As of the Cut-Off Date, 96.3% of the loans in the pool are current. Approximately 0.5% are in bankruptcy. (All bankruptcy loans are performing.) Approximately 49.7% of the mortgage loans have been zero times 30 days delinquent (0 x 30) for at least the past 24 months under the Mortgage Bankers Association (MBA) delinquency method and 88.8% have been 0 x30 for at least the past 12 months under the MBA delinquency method.

The majority of the pool (80.3%) is exempt from the Consumer Financial Protection Bureau Ability-to-Repay (ATR)/Qualified Mortgage (QM) rules because the loans were originated as investor property loans or were originated prior to January 10, 2014, the date on which the rules became applicable. The loans subject to the ATR rules are designated as non-QM (19.7%).

The Mortgage Loan Sellers—Goldman Sachs Mortgage Company (GSMC; 66.5%), MCLP Asset Company, Inc. (27.5%), and MTGLQ Investors, L.P. (6.0%)—acquired the mortgage loans in various transactions prior to the Closing Date from various mortgage loan sellers or from an affiliate. GS Mortgage Securities Corp. (the Depositor) will contribute the loans to the Trust. These loans were originated and previously serviced by various entities through purchases in the secondary market.

The Sponsor, GSMC, or a majority-owned affiliate, will retain an eligible vertical interest in the transaction consisting of an uncertificated interest (the Retained Interest) in the Trust representing the right to receive at least 5.0% of the amounts collected on the mortgage loans, net of the Trust's fees, expenses, and reimbursements paid on the Notes (other than the Class R Notes) and the Retained Interest to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder.

As of the Cut-Off Date, the mortgage loans will be serviced by NewRez LLC d/b/a Shellpoint Mortgage Servicing (SMS; 89.2%) and Select Portfolio Servicing, Inc. (SPS; 10.8%).

Similar to previous GSMBS RPL securitizations, the servicing fee payable to SMS for the GSMBS 2023-RPL2 mortgage loans will be calculated using a dollar servicing fee construct. The monthly servicing fee charged per loan will be determined based on the delinquency status of each mortgage loan with a maximum servicing fee of 0.35%. The servicing fee payable to SPS will be 0.07%. In its analysis, DBRS Morningstar assumed a fixed aggregate servicing fee rate.

There will not be any advancing of delinquent principal or interest on any mortgages by the Servicer or any other party to the transaction; however, the Servicer is obligated to make advances in respect of the preservation, inspection, restoration, protection, and repair of a mortgaged property, which includes delinquent tax and insurance payments, the enforcement or judicial proceedings associated with a mortgage loan, and the management and liquidation of properties (to the extent that the related Servicer deems such advances recoverable).

When the aggregate pool balance of the mortgage loans is reduced to less than 25% of the Cut-Off Date balance, the Controlling Noteholder will have the option to purchase all remaining loans and other property of the Issuer at a specified minimum price. The Controlling Noteholder will be the beneficial owner of more than 50% the Class B-5 Notes (if no longer outstanding, the next most subordinate Class of Notes, other than Class X).

As a loss-mitigation alternative, the Controlling Noteholder may direct the Servicer to sell mortgage loans that are in an early or advanced stage of default or for which foreclosure or default is imminent to unaffiliated third-party investors in the secondary whole loan market on arm's-length terms and at fair market value to maximize proceeds on such loans on a net present value basis.

The transaction employs a sequential-pay cash flow structure. Principal proceeds and excess interest can be used to cover interest shortfalls on the Notes, but such shortfalls on the Class M-1 Notes and more subordinate bonds will not be paid from principal proceeds until the more senior classes are retired. Excess interest can be used to amortize the principal of the notes after paying transaction parties' fees, Net Weighted-Average Coupon (WAC) shortfalls, and making deposits on to the breach reserve account.

The ratings reflect transactional strengths that include the following:
-- Loan-to-value ratios,
-- Current loan status,
-- Seasoning, and
-- Satisfactory third-party due-diligence review.

The transaction also includes the following challenges:
-- Representations and warranties standard,
-- No servicer advances of delinquent principal and interest, and
-- Assignments, endorsements, and missing documents.

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

DBRS Morningstar’s credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated Notes are the related interest distribution amount, any interest shortfall amount, and the related class balances.

DBRS Morningstar’s credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations. For example, in this transaction, DBRS Morningstar's rating on the Class A-1 Notes does not address the payment of any Net WAC Shortfalls based on its position in the cash flow waterfall.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

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/416784 (July 4, 2023).

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

The principal methodology applicable to the credit ratings is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (August 9, 2023; https://www.dbrsmorningstar.com/research/418987).

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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit 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 credit 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.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit 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

-- 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 (July 17, 2023), https://www.dbrsmorningstar.com/research/417275

-- Operational Risk Assessment for U.S. RMBS Servicers (July 17, 2023), https://www.dbrsmorningstar.com/research/417276

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