DBRS Morningstar Confirms Credit Ratings on CHIP Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its credit ratings on the following outstanding notes (the Notes) issued by CHIP Mortgage Trust (the Trust):

-- Series 2020-1 Medium Term Notes at AAA (sf)
-- Series 2021-1 Medium Term Notes at AAA (sf)
-- Series 2023-1 Medium Term Notes at AAA (sf)

All senior Notes issued by the Trust rank pari passu with each other.

The credit rating confirmations are based on the following factors:

(1) Credit enhancement is provided by a combination of (A) a minimum cash reserve equal to six months of interest payable on the Notes to mitigate cash flow irregularity, (B) overcollateralization, and (C) subordination (if applicable). The Trust continues to comply with the limit on senior debt issuance of up to 93% of the aggregate outstanding asset balance when short-term notes or Series 2023-1 Notes are outstanding. As of September 2023, the senior debt-to-mortgage ratio and total debt-to-mortgage ratio was 87.8%.

(2) The conservative underwriting standards associated with the origination of the reverse mortgages, including the use of qualified appraisers; the reduction of appraised values based on the region, property quality, property type, and specific location to reflect potential market illiquidity or housing volatility; and the use of conservative actuarial tables in determining the expected occupancy term, resulting in low historical losses.

(3) The extensive experience of HomeEquity Bank in originating and underwriting reverse mortgages along with the level of ongoing review and reappraisal of the properties. Reappraisal of properties occurs on a formal basis at least every five years.

(4) The assets are a large, diversified portfolio of reverse mortgages with a first-ranking charge on residential properties across Canada.

DBRS Morningstar monitors the performance of the transaction to identify any deviation from DBRS Morningstar’s expectation at issuance and to ensure that the credit ratings remain appropriate. The review is predicated on the timely receipt of performance information from the related providers. The performance and characteristics of the reverse mortgage portfolio and the Notes are available and updated each month in the Monthly Canadian ABS Report.

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 ratings 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.

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