Morningstar DBRS Takes Credit Rating Actions on 6 U.S. RMBS Transactions

DBRS, Inc. (Morningstar DBRS) reviewed 99 classes from 6 U.S. residential mortgage-backed securities (RMBS) transactions. These transactions consist of non-qualified mortgage and small-balance commercial mortgages collateralized by various types of commercial, multifamily rental, and mixed-use properties. Of the 99 classes reviewed, Morningstar DBRS confirmed all 99 credit ratings.

The credit rating confirmations reflect asset performance and credit-support levels that are consistent with the current credit ratings.

The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary "Baseline Macroeconomic Scenarios for Rated Sovereigns June 2024 Update" published on June 28, 2024, (https://dbrs.morningstar.com/research/435206/baseline-macroeconomic-scenarios-for-rated-sovereigns-june-2024-update) These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.

The credit rating actions are the result of Morningstar DBRS' application of its U.S. RMBS Surveillance Methodology," published on June 28, 2024 and its "North American CMBS Surveillance Methodology," published on March 1, 2024.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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. The Morningstar DBRS short-term debt credit rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

Environmental (E) Factors
There were no Environmental factor(s) that had a relevant or significant effect on the credit analysis.

Social (S) Factors
There were no Social factor(s) that had a relevant or significant effect on the credit analysis.

Governance (G) Factors
There were no Governance factor(s) that had a relevant or significant 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 (January 23, 2024), https://dbrs.morningstar.com/research/427030/morningstar-dbrs-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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

The principal methodologies applicable to the credit ratings are U.S. RMBS Surveillance Methodology (June 28, 2024) https://dbrs.morningstar.com/research/435291/us-rmbs-surveillance-methodology and the North American CMBS Surveillance Methodology (March 1, 2024), https://www.dbrsmorningstar.com/research/428798/north-american-cmbs-surveillance-methodology.

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

The credit ratings assigned to the classes below materially deviate from the credit ratings implied by the predictive model. Morningstar DBRS typically expects there to be a substantial likelihood that a reasonable investor or other user of the credit ratings would consider a three-notch or more deviation from the credit rating stress(es) implied by the predictive model to be a significant factor in evaluating the credit ratings. The rationale for the material deviations are as follows:

The below tranches materially deviate because actual deal or tranche performance is not fully reflected in projected cashflows / model output:
-- Velocity Commercial Capital Loan Trust 2021-2, Mortgage-Backed Certificates, Series 2021-2, Class M-5
-- A&D Mortgage Trust 2023-NQM3, Mortgage Pass-Through Certificates, Series 2023-NQM3, Class A-1

The below tranches materially deviate because additional seasoning and/or updated performance is to be measured against a sustainable upgrade loan level cash flow stress:
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M-1
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M-2
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M-4
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M-5
-- Velocity Commercial Capital Loan Trust 2023-3, Mortgage-Backed Certificates, Series 2023-3, Class M-1
-- Velocity Commercial Capital Loan Trust 2023-3, Mortgage-Backed Certificates, Series 2023-3, Class M-2

The below tranches materially deviate because of dependency on another rating (such as interest only tranche or exchangeable tranche):
-- Velocity Commercial Capital Loan Trust 2021-2, Mortgage-Backed Certificates, Series 2021-2, Class M5-A
-- Velocity Commercial Capital Loan Trust 2021-2, Mortgage-Backed Certificates, Series 2021-2, Class M5-IO
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M1-A
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M1-IO
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M2-A
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M2-IO
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M4-A
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M4-IO
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M5-A
-- Velocity Commercial Capital Loan Trust 2021-3, Mortgage-Backed Certificates, Series 2021-3, Class M5-IO
-- Velocity Commercial Capital Loan Trust 2023-3, Mortgage-Backed Certificates, Series 2023-3, Class M1-A
-- Velocity Commercial Capital Loan Trust 2023-3, Mortgage-Backed Certificates, Series 2023-3, Class M1-IO
-- Velocity Commercial Capital Loan Trust 2023-3, Mortgage-Backed Certificates, Series 2023-3, Class M2-A
-- Velocity Commercial Capital Loan Trust 2023-3, Mortgage-Backed Certificates, Series 2023-3, Class M2-IO

The credit ratings were initiated at the request of the rated entity. The credit rating was not initiated at the request of a third party.

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.

These are solicited credit ratings.

DBRS, Inc.
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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.

RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (June 28, 2024; https://dbrs.morningstar.com/research/435279/rmbs-insight-13-us-residential-mortgage-backed-securities-model-and-rating-methodology)

Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024; https://dbrs.morningstar.com/research/428623/interest-rate-stresses-for-us-structured-finance-transactions)

Legal Criteria for U.S. Structured Finance (April 15, 2024; https://dbrs.morningstar.com/research/431205/legal-criteria-for-us-structured-finance)

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