DBRS Morningstar Finalizes Provisional Credit Ratings on BRAVO Residential Funding Trust 2023-RPL1

DBRS, Inc. (DBRS Morningstar) finalized its provisional credit ratings on the following Mortgage-Backed Notes, Series 2023-RPL1 (the Notes) issued by BRAVO Residential Funding Trust 2023-RPL1 (the Trust):

-- $342.3 million Class A-1 at AAA (sf)
-- $34.4 million Class A-2 at AA (high) (sf)
-- $376.7 million Class A-3 at AA (high) (sf)
-- $405.1 million Class A-4 at A (high) (sf)
-- $425.8 million Class A-5 at BBB (high) (sf)
-- $28.4 million Class M-1 at A (high) (sf)
-- $20.7 million Class M-2 at BBB (high) (sf)
-- $14.0 million Class B-1 at BB (high) (sf)
-- $11.5 million Class B-2 at B (high) (sf)

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

The AAA (sf) credit rating on the Class A-1 Notes reflects 31.35% of credit enhancement provided by subordinated notes. The AA (high) (sf), A (high) (sf), BBB (high) (sf), BB (high) (sf), and B (high) (sf) credit ratings reflect 24.45%, 18.75%, 14.60%, 11.80%, and 9.50% of credit enhancement, respectively.

This transaction is a securitization of a portfolio of seasoned reperforming, first-lien, residential mortgages funded by the issuance of the Notes. The Notes are 7,781 loans with a total principal balance of $498,581,961 as of the Cut-Off Date (August 31, 2023).

The portfolio is approximately 192 months seasoned on a weighted-average (WA) basis and contains 69.8% modified loans. The modifications happened more than two years ago for 64.9% of the modified loans. Within the pool, 3,848 mortgages have non-interest-bearing deferred amounts, which equate to approximately 7.6% of the total principal balance.

As of the Cut-Off Date, 89.3% of the pool is current, including 64 loans (1.2%) that are current and in active bankruptcy, while 10.7% of the pool is 30 days delinquent, including 20 loans (0.4%) in active bankruptcy loans under the Mortgage Bankers Association (MBA) delinquency method. Approximately 40.4%, 59.7%, and 74.7% of the mortgage loans by balance have been current for the past 24, 12, and six months, respectively, under the MBA delinquency method.

The majority of the pool (93.3%) is not subject to the Consumer Financial Protection Bureau Ability-to-Repay (ATR)/Qualified Mortgage (QM) rules. The remaining 6.7% of the pool may be subject to the ATR rules but a designation was not provided. As such, DBRS Morningstar assumed these loans to be non-QM in its analysis.

PIF Residential Funding V Ltd., an affiliate of Loan Funding Structure III LLC (the Sponsor), will acquire the loans and contribute them to the Trust. The Sponsor or one of its majority-owned affiliates will acquire and retain a 5% eligible vertical interest in the offered Notes, consisting of 5% of each class to satisfy the credit risk retention requirements.

The mortgage loans will be serviced by Nationstar Mortgage LLC doing business as (dba) Rushmore Servicing (Rushmore; 55.0%), Fay Servicing, LLC (Fay; 26.4%) and Select Portfolio Servicing, Inc. (SPS; 18.6%). For this transaction, the aggregate servicing fee paid from the Trust will be 0.40%. In August 2023, Mr. Cooper Group Inc. (the parent of Nationstar Mortgage LLC dba Mr. Cooper) acquired investment management firm Roosevelt Management Company, LLC and its affiliated subsidiaries including Rushmore Loan Management Services (ie, Rushmore is now part of Mr. Cooper).

There will not be any advancing of delinquent principal or interest on any mortgages by the Servicers or any other party to the transaction; however, the Servicers are obligated to make advances in respect of homeowner association fees, taxes, and insurance as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.

When the aggregate pool balance is reduced to less than 10% of the balance as of the Cut-Off Date, the holder of the Trust certificates may purchase all of the mortgage loans and real estate owned (REO) properties from the Issuer at a price equal to the sum of principal balance of the mortgage loans; accrued and unpaid interest thereon; the fair market value of REO properties net of liquidation expenses; unpaid servicing advances; and any fees, expenses, or other amounts owed to the transaction parties (optional termination).

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 and more subordinate Notes will not be paid from principal proceeds until the Class A-1 and A-2 Notes are retired. The Class A1 Notes are entitled to receive Net WAC shortfall amounts that would otherwise be used to pay current interest or any interest shortfall amount to the Class B-3, Class B-4, or Class B-5 Notes reverse sequentially.

The credit ratings reflect transactional strengths that include the following:
-- Seasoning,
-- Clean payment history,
-- Sequential-pay structure, and
-- Certain aspects of the 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
-- Limitations of the third-party due-diligence review.

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

DBRS Morningstar’s credit rating on the Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for the rated Notes are the Current Interest Amount, Interest Shortfall Amount and the Principal Remittance Amount.

DBRS Morningstar’s credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, in this transaction, DBRS Morningstar’s credit ratings do not address the payment of any Net WAC Shortfall amount 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 ratings is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (August 31, 2023; https://www.dbrsmorningstar.com/research/420108).

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/407678.

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 credit rating process.

DBRS, Inc.
140 Broadway, 43rd Floor
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.

-- 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 8, 2023; https://www.dbrsmorningstar.com/research/420333)

-- 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 (August 31, 2023; https://www.dbrsmorningstar.com/research/420106)

-- Operational Risk Assessment for U.S. RMBS Servicers (August 31, 2023; https://www.dbrsmorningstar.com/research/420107)

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