Morningstar DBRS Finalizes Provisional Ratings on CIM Trust 2024-R1

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the Mortgage-Backed Notes, Series 2024-R1 (the Notes) issued by CIM Trust 2024-R1 (CIM 2024-R1 or the Trust) as follows:

-- $351.8 million Class A1 at AAA (sf)
-- $25.7 million Class A2 at AA (high) (sf)
-- $23.9 million Class M1 at A (high) (sf)
-- $17.8 million Class M2 at BBB (high) (sf)
-- $10.5 million Class B1 at BBB (low) (sf)
-- $9.4 million Class B2 at BB (low) (sf)
-- $14.5 million Class B3 at B (low) (sf)

The AAA (sf) credit rating on the Notes reflects 24.85% of credit enhancement provided by subordinated notes. The AA (high) (sf), A (high) (sf), BBB (high) (sf), BBB (low) (sf), BB (low) and B (low) (sf) credit ratings reflect 19.35%, 14.25%, 10.45%, 8.20%, 6.20% and 3.10% of credit enhancement, respectively.

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

This transaction is a securitization of a portfolio of primarily seasoned performing and reperforming first-lien residential mortgages and funded by the issuance of the Notes. The Notes are backed by 2,055 loans with a total principal balance of $468,148,081 as of the Cut-Off Date (June 30, 2024).

The loans are approximately 87 months seasoned on average, with approximately 38.8% of the pool originated within the last 24 months. As of the Cut-Off Date, 91.3% of the pool is current, 8.1% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method, and 0.6% is in bankruptcy (all except six of the bankruptcy loans are performing). Approximately 65.8% and 55.6% of the mortgage loans have been zero times (x) 30 days delinquent for the past 12 months and 24 months, respectively, or life of the loan if less than 12 or 24 months under the MBA delinquency method.

In the portfolio, 30.6% of the loans have been modified. The modifications happened more than two years ago for 82.3% of the modified loans. Within the pool, 660 mortgages have non-interest-bearing deferred amounts totaling $14,655,559, which equates to 3.1% of the total principal balance. Unless specified otherwise, all statistics on the mortgage loans in this report are based on the current balance, including the applicable non-interest-bearing deferred amounts.

The majority of the pool (45.2%) is exempt from the Consumer Financial Protection Bureau Ability-to-Repay (ATR)/Qualified Mortgage (QM) rules. Morningstar DBRS assumed the loans subject to the ATR rules are designated as QM Safe Harbor (40.6%), Non-QM (9.8%), and QM Rebuttable (4.4%) by unpaid principal balance (UPB) based upon the third-party due diligence results.

Fifth Avenue Trust (the Seller) acquired the mortgage loans prior to the Cut-Off Date and, through a wholly owned subsidiary, Funding Depositor LLC (the Depositor), will contribute the loans to the Trust. As the Sponsor, Chimera Investment Corporation (Chimera) or one of its majority-owned affiliates will acquire and retain a 5% eligible horizontal residual interest in the Notes (other than the Class A-IO-S, PRA, and R notes), consisting of a portion of the Class B2 notes and all of the Class B3, B4, and C notes, in the aggregate, to satisfy the credit risk retention requirements. Various entities originated and previously serviced the loans through purchases in the secondary market.

Prior to CIM 2024-R1, Chimera had issued 52 seasoned securitizations under the CIM shelf since 2014, all of which were backed by subprime, reperforming, or nonperforming loans. Morningstar DBRS has rated 121 of the previously issued CIM reperforming loan deals. Morningstar DBRS reviewed the historical performance of both the rated and unrated transactions issued under the CIM shelf, particularly with respect to the reperforming transactions, which may not have collateral attributes similar to CIM 2024-R1. The delinquencies and losses in the reperforming CIM transactions have been generally in line with expectations for previously distressed assets.

All loans will be serviced by Fay Servicing, LLC(the Servicer). There will not be any advancing of delinquent principal or interest on any mortgages by the Servicer or any other party to the transaction; however, the related Servicer is obligated to make advances in respect of homeowner's association fees, taxes, and insurance as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.

On or after any Payment Date when the aggregate UPB of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Purchase Option Holder (the Depositor or any successor or assignee) has the option to purchase all of the mortgage loans and any real estate owned (REO) properties at a certain purchase price equal to the UPB of the mortgage loans, plus the fair market value of the REO properties and any unpaid expenses and reimbursement amounts.

The transaction employs a sequential-pay cash flow structure. Principal proceeds can be used to cover interest shortfalls on the Notes, but such shortfalls on Class A2 and more subordinate bonds will not be paid from principal proceeds until the Class A1 notes are retired.

The ratings reflect transactional strengths that include the following:
-- Credit quality relative to reperforming pools,
-- Satisfactory third-party due-diligence review,
-- Structural features,
-- Seasoning, and
-- Current delinquency status.

The transaction also includes the following challenges:
-- Representations and warranties standard,
-- No servicer advances of delinquent principal and interest, and
-- Assignments and endorsements.

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

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 current interest, any interest shortfall amount, and the related class principal balances.

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, in this transaction, Morningstar DBRS' credit rating on the Class A-1 notes does not address the payment of any Cap Carryover Amounts based on its 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, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) 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) https://dbrs.morningstar.com/research/427030.

Notes:
All figures are in US Dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (28 June 2024) https://dbrs.morningstar.com/research/435279

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

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

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.

-- Assessing U.S. RMBS Pools Under the Ability-to-Repay Rules (June 28, 2024),
https://dbrs.morningstar.com/research/435258
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024),
https://dbrs.morningstar.com/research/428623
-- Third-Party Due-Diligence Criteria for U.S. RMBS Transactions (June 28, 2024),
https://dbrs.morningstar.com/research/435282
-- Representations and Warranties Criteria for U.S. RMBS Transactions (June 28, 2024),
https://dbrs.morningstar.com/research/435273
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205
-- Operational Risk Assessment for U.S. RMBS Originators (June 28, 2024),
https://dbrs.morningstar.com/research/435259
-- Operational Risk Assessment for U.S. RMBS Servicers (June 28, 2024),
https://dbrs.morningstar.com/research/435261

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.