Morningstar DBRS Assigns Provisional Credit Ratings to SAIF Securitization Trust 2024-CES1

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the Asset-Backed Securities, Series 2024-CES1 (the Notes) to be issued by SAIF Securitization Trust 2024-CES1 (SAIF 2024-CES1 or the Issuer) as follows:

-- $153.1 million Class A-1 at AAA (sf)
-- $9.1 million Class A-2 at AA (sf)
-- $9.8 million Class A-3 at A (sf)
-- $9.1 million Class M-1 at BBB (sf)
-- $7.4 million Class B-1 at BB (sf)
-- $4.4 million Class B-2 at B (sf)

The AAA (sf) credit rating reflects 21.85% of credit enhancement provided by the subordinated notes. The AA (sf), A (sf), and BBB (sf), BB (sf), and B (sf) credit ratings reflect 17.20%, 12.20%, 7.55%, 3.75%, and 1.50% of credit enhancement, respectively.

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

SAIF 2024-CES1 is a securitization of a portfolio of fixed, prime and near-prime, closed-end second-lien (CES) residential mortgages funded by the issuance of the Asset-Backed Securities, Series 2024-CES1 (the Notes). The Notes are backed by 3,497 mortgage loans with a total principal balance of $195,902,408 as of the Cut-Off Date (July 31, 2024).

SAIF 2024-CES1 represents the first CES securitization by SAGE Residential AIF I, LLC. Carrington Mortgage Loans, LLC (Carrington; 77.0%) is the top originator and servicer for the mortgage pool followed by Planet Home Lending, LLC (Planet; 23.0%).

Wilmington Savings Fund Society, FSB will act as the Indenture Trustee, Delaware Trustee, Paying Agent, Note Registrar, and Custodian. SAIF I Master Servicing, LLC will act as the Securities Administrator.

The portfolio, on average, is 11 months seasoned, though seasoning ranges from two to 24 months. Borrowers in the pool represent prime and near-prime credit quality - with a weighted-average (WA) Morningstar DBRS-calculated FICO score of 715, Issuer-provided original combined loan-to-value ratio (CLTV) of 71.7%, and the vast majority of the loans originated with full documentation standards. 96.7% of the loans are current and have never been delinquent since origination.

Based on Issuer-provided information, certain loans in the pool (1.0%) are not subject to or exempt from the Consumer Financial Protection Bureau's (CFPB) Ability-to-Repay (ATR)/Qualified Mortgage (QM) rules as they are made to investors for business purposes. The loans subject to the ATR rules are designated as QM Safe Harbor (5.9%), QM Rebuttable Presumption (90.7%), and Non-QM (2.4%) by UPB.

There will not be any advancing of delinquent principal or interest on any mortgages by the Servicers or any other party to the transaction. In addition, the related servicer is not obligated to make advances in respect of homeowner association fees, taxes, and insurance, installment payments on energy improvement liens, and reasonable costs and expenses incurred in the course of servicing and disposing of properties unless a determination is made that there will be material recoveries.

For this transaction, any loan that is 180 days delinquent under the Mortgage Bankers Association (MBA) delinquency method, upon review by the related Servicer, may be considered a Charged-Off Loan. With respect to a Charged-Off Loan, the total unpaid principal balance will be considered a realized loss and will be allocated reverse sequentially to the Noteholders. If there are any subsequent recoveries for such Charged-Off Loans, the recoveries will be included in the interest remittance amount and principal remittance amount and applied in accordance with the respective distribution waterfall; in addition, any class principal balances of Notes that have been previously reduced by allocation of such realized losses may be increased by such recoveries sequentially in order of seniority. Morningstar DBRS' analysis assumes reduced recoveries upon default on loans in this pool.

On or after the earlier of (1) August 2027 or (2) the date when the unpaid principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Controlling Holder (an affiliate of the Sponsor) may redeem all of the outstanding Notes (Optional Redemption) at a price equal to (A) the class balances of the related Notes and (B) accrued and unpaid interest (including any cap carryover amounts); and (C) unpaid expenses. The proceeds will be distributed to the Noteholders in accordance with the priority of payments.

The Controlling Holder, at its option, may purchase any mortgage loan that is 90 days or more delinquent under the Mortgage Bankers Association (MBA) method at the repurchase price (Optional Purchase) described in the transaction documents. The total balance of such loans purchased by the Depositor will not exceed 10% of the Cut-Off Date balance.

This transaction incorporates a sequential-pay cash flow structure. Principal proceeds can be used to cover interest shortfalls after the more senior tranches are paid in full (IPIP). For this transaction, the Class A-1, A-2, A-3, and M-1 fixed rates step up by 100 basis points on and after the payment date in September 2028.

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. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.

The credit ratings reflect transactional strengths that include the following:
-- Robust Equity, Documentation Standards, and Near-Prime Credit Quality
-- Certain second-lien attributes
-- Satisfactory third-party due-diligence review
-- Current loan status
-- Improved underwriting standards

The transaction also includes the following challenges:

-- Financially Leveraged Borrowers
-- Representations and Warranties (R&W) Framework
-- No servicer advances of delinquent P&I
-- Limited third-party diligence valuation review

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 Interest Distribution Amount, Interest Carryforward Amount, and Class Principal Balance. The associated financial obligations are listed at the end of this Press Release.

Morningstar DBRS' credit ratings on the Class A-1, Class A-2, Class A-3, and Class M-1 Notes also address the credit risk associated with the increased rate of interest applicable if the Class A-1, Class A-2, Class A-3, and Class M-1 Notes remain outstanding on or after the distribution date in September 2028 in accordance with the applicable transaction document(s).

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 ratings do not address the payment of any Cap Carryover Amount 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. The Morningstar DBRS short-term debt 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

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 Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in U.S. 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 (June 28, 2024) https://dbrs.morningstar.com/research/435279.

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

Morningstar DBRS materially deviated from its principal methodology when determining the credit ratings assigned to all rated classes by deriving probability of default for this pool by using the first-lien module (at the CLTV level) of its RMBS Insight model. The material deviation is warranted given that the CES module of Morningstar DBRS' proprietary RMBS Insight model is developed using pre-crisis CES mortgage and performance data, which does not give credit to certain collateral attributes and improved underwriting, and therefore may not be applicable for post-crisis CES loans.

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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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

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