DBRS Morningstar Upgrades Three Credit Ratings and Confirms Five Credit Ratings on Prime Structured Mortgage (PriSM) Trust, Series 2021-1

DBRS Limited (DBRS Morningstar) upgraded its credit ratings on the following Mortgage-Backed Certificates, Series 2021-1 issued by Prime Structured Mortgage (PriSM) Trust:

-- Mortgage-Backed Certificates, Series 2021-1, Class C (the Class C Certificates) to A (high) (sf) from A (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class D (the Class D Certificates) to BBB (high) (sf) from BBB (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class E (the Class E Certificates; together with the Class C Certificates, the Class D Certificates, the Upgraded Certificates) to BB (high) (sf) from BB (sf)

In addition, DBRS Morningstar confirmed its credit ratings on the following certificates:

-- Mortgage-Backed Certificates, Series 2021-1, Class A (the Class A Certificates) at AAA (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class VFC (the Class VFC Certificates) at AAA (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class IO (the Class IO Certificates) at AAA (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class B (the Class B Certificates) at AA (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class F (the Class F Certificates; together with the Class A Certificates, the Class VFC Certificates, the Class IO Certificates, the Class B Certificates, and the Upgraded Certificates, the Rated Certificates) at B (sf)

The credit ratings on the Class A Certificates, the Class VFC Certificates (together with the Class A Certificates, the Senior Principal Certificates), the Class B Certificates, the Class C Certificates, the Class D Certificates, the Class E Certificates, and the Class F Certificates represent the timely payment of interest to the holders thereof and the ultimate payment of principal by the Rated Final Distribution Date under the respective credit rating stress. The credit rating on the Class IO Certificates is an opinion that addresses the likelihood of the Notional Amount of the Class IO Certificates’ applicable reference certificates (i.e., the Senior Principal Certificates) being adversely affected by credit losses.

The Mortgage-Backed Certificates, Series 2021-1, Class G (the Class G Certificates) and Mortgage-Backed Certificates, Series 2021-1, Class R (collectively with the Class G Certificates and the Rated Certificates, the Certificates) are not rated by DBRS Morningstar.

The credit rating confirmations are based on the following factors:

(1) The collateral comprises a pool of first-lien, fixed-rate, prime, B-20-compliant, uninsured Canadian residential mortgages with a maximum loan-to-value (LTV) ratio of 80% at origination. The total outstanding note balance was $559.3 million as of September 2023, representing a pool factor of 82.9%. The pass-through structure of the Certificates has resulted in higher subordination across the Rated Certificates.

(2) Credit enhancement provided by subordination has built up since issuance, providing protection to the Certificates.

(3) Credit performance since inception has been stable with no reported losses. The transaction benefits from strong asset quality consisting of prime conventional mortgages with high credit scores and low LTV ratios. Losses are allocated to the lowest-ranking Certificates outstanding.

(4) TD Securities Inc., a wholly owned subsidiary of The Toronto-Dominion Bank (rated AA (high) with a Stable trend by DBRS Morningstar), is the Seller and Master Servicer and provides representations and warranties and is ultimately responsible for all the servicing obligations of the mortgages. First National Financial LP (rated BBB with a Stable trend by DBRS Morningstar), CMLS Financial Ltd., Paradigm Quest Inc., and MCAP Service Corporation, together ultimately servicing the Mortgage Loans as either Sub-Servicers or sub-sub-servicers, have extensive servicing experience in the Canadian residential mortgage market.

The credit ratings on the Class D Certificates materially deviate from higher credit ratings implied by the quantitative results. DBRS Morningstar considers a material deviation to be a credit rating differential of three or more notches between the assigned credit rating and the credit rating implied by the quantitative results that is a substantial component of a credit rating methodology. The deviations are warranted as DBRS Morningstar recognizes the structural subordination of the Class D Certificates to the Class C Certificates.

DBRS Morningstar monitors the performance of each transaction to identify any deviation from its expectations at issuance and to ensure that the credit ratings remain appropriate. The review is predicated upon the timely receipt of performance information from the related providers. The performance and characteristics of the pool and the Certificates are available and updated each month in the Monthly Canadian ABS Report available at www.dbrsmorningstar.com.

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 Canadian dollars unless otherwise noted.

The principal methodology applicable to the credit rating is Master Canadian Structured Finance Surveillance Methodology (June 7, 2023; https://www.dbrsmorningstar.com/research/415503).

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 related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

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 Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

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

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/410863.

Predictive model: DBRS Canadian RMBS Model (Version 5.0.0.3 https://www.dbrsmorningstar.com/models/)

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