Morningstar DBRS Finalizes Provisional Credit Ratings on Brean Asset-Backed Securities Trust 2024-RM8

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following Mortgage-Backed Notes, Series 2024-RM8 (the Notes) issued by Brean Asset-Backed Securities Trust 2024-RM8:

-- $156.0 million Class A1 at AAA (sf)
-- $33.1 million Class A2 at AAA (sf)
-- $189.1 million Class AM at AAA (sf)
-- $1.8 million Class M1 at AA (sf)
-- $1.8 million Class M2 at A (sf)
-- $5.2 million Class M3 at BBB (sf)
-- $5.1 million Class M4 at B (sf)

Class AM is an exchangeable note. This class can be exchanged for combinations of exchange notes as specified in the offering documents.

The AAA (sf) credit rating reflects 115.4% of cumulative advance rate. The AA (sf), A (sf), BBB (sf), and B (sf) ratings reflect 116.5%, 117.6%, 120.8%, and 123.9% of cumulative advance rates, respectively.

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

Lenders typically offer reverse mortgage loans to people who are at least 62 years old. Through reverse mortgage loans, borrowers have access to home equity through a lump sum amount or a stream of payments without periodically repaying principal or interest, allowing the loan balance to accumulate over a period of time until a maturity event occurs. Loan repayment is required (1) if the borrower dies, (2) if the borrower sells the related residence, (3) if the borrower no longer occupies the related residence for a period (usually a year), (4) if it is no longer the borrower's primary residence, (5) if a tax or insurance default occurs, or (6) if the borrower fails to properly maintain the related residence. In addition, borrowers must be current on any homeowner's association dues, if applicable. Reverse mortgages are typically nonrecourse; borrowers don't have to provide additional assets in cases where the outstanding loan amount exceeds the property's value (the crossover point). As a result, liquidation proceeds will fall below the loan amount in cases where the outstanding balance reaches the crossover point, contributing to higher loss severities for these loans.

As of the April 30, 2024, cut-off date, the collateral has approximately $163.8 million in current unpaid principal balance (UPB) from 432 performing and three called due fixed-rate jumbo reverse mortgage loans secured by first liens on single-family residential properties, condominiums, townhomes, multifamily (two- to-four family) properties, cooperatives, planned unit developments, and manufactured homes. About 92.3% of the loans by UPB were originated between 2023 and 2024 and the rest between 2019 and 2022. All loans in this pool have a fixed interest rate with a 9.563% weighted-average coupon (WAC).

The transaction uses a structure in which cash distributions are made sequentially to each rated note until the rated amounts with respect to such notes are paid off. No subordinate note shall receive any payments until the balance of senior notes has been reduced to zero.

The note rate for the Class A1 and A2 Notes (collectively, the Class A Notes) will reduce to 0.25% if the Home Price Percentage (as measured using the Standard and Poor's (S&P) CoreLogic Case-Shiller National Index) declines by 30% or more compared with the value on the cut-off date.

If the notes are not paid in full or redeemed by the issuer on the Expected Repayment Date in May 2029, the Issuer will be required to conduct an auction within 180 calendar days of the Expected Repayment Date to offer all the mortgage assets and use the proceeds, net of fees and expenses from auction, to be applied to payments to all amounts owed. If the proceeds of the auction are not sufficient to cover all the amounts owed, the Issuer will be required to conduct an auction within six months of the previous auction.

If, on any Payment Date the average one-month conditional prepayment rate (CPR) over the immediately preceding six-month period is equal to or greater than 25%, 50% of available funds remaining after payment of fees and expenses and interest to the Class A Notes will be deposited into the Refunding Account, which may be used to purchase additional mortgage loans.

Morningstar DBRS' 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 Note Amount and Interest Accrual Amounts.

Morningstar DBRS' 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, the credit ratings on the Notes do not address Additional Accrued Amounts based on their position in the cash flow waterfall.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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, or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024) at https://dbrs.morningstar.com/research/427030.

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

The principal methodology applicable to the credit ratings is Rating and Monitoring U.S. Reverse Mortgage Securitizations (17 July 2023) https://dbrs.morningstar.com/research/417277/rating-and-monitoring-u.s.-reverse-mortgage-securitizations

Other methodologies referenced in this transaction are listed at the end of this press release.

The Morningstar DBRS Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. Morningstar DBRS 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.

Morningstar DBRS 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

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://dbrs.morningstar.com/about/methodologies.

-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205/
-- 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
-- Representations and Warranties Criteria for U.S. RMBS Transactions (May 16, 2023), https://www.dbrsmorningstar.com/research/414076

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.