Morningstar DBRS Takes Credit Rating Actions on 38 U.S. RMBS Transactions

DBRS, Inc. (Morningstar DBRS) reviewed 425 classes from 38 U.S. residential mortgage-backed securities (RMBS) transactions. Out of the 38 transactions reviewed, 35 are classified as legacy RMBS and three as ReREMICs of legacy RMBS. Of the 425 classes reviewed, Morningstar DBRS upgraded its credit ratings on eight classes and confirmed its credit ratings on 417 classes.

The credit rating upgrades reflect a positive performance trend and an increase in credit support sufficient to withstand stresses at the new credit rating level. 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) 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.

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
There were no Environmental/Social/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) at 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 U.S. RMBS Surveillance Methodology (June 28, 2024) https://dbrs.morningstar.com/research/435291.

Other methodologies referenced in this transaction 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 stresses implied by the predictive model to be a significant factor in evaluating the credit ratings. The rationale for the material deviations below varies among tranches having (1) additional seasoning and/or updated performance to be measured against a sustainable upgrade loan-level cash flow stress, (2) actual deal or tranche performance not fully reflected in projected cash flows/model output, or (3) a small loan count.

The below tranches materially deviate because of additional seasoning and/or updated performance to be measured against a sustainable upgrade loan-level cash flow stress.

-- Aegis Asset Backed Securities Trust 2005-3, Mortgage-Backed Notes, Series 2005-3, Class M3
-- Impac CMB Trust Series 2005-3, Collateralized Asset-Backed Bonds, Series 2005-3, Class A-1
-- Impac CMB Trust Series 2005-3, Collateralized Asset-Backed Bonds, Series 2005-3, Class A-2
-- Impac CMB Trust Series 2005-3, Collateralized Asset-Backed Bonds, Series 2005-3, Class A-3
-- New Century Home Equity Loan Trust 2005-2, Asset-Backed Notes, Series 2005-2, Class M-4
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-WF1, Home Equity Loan Trust Asset-Backed Certificates, Series 2006-WF1, Class M-3
-- Securitized Asset Backed Receivables LLC Trust 2007-NC2, Mortgage Pass-Through Certificates, Series 2007-NC2, Class A-1
-- Securitized Asset Backed Receivables LLC Trust 2006-WM2, Mortgage Pass-Through Certificates, Series 2006-WM2, Class A-1

The below tranches materially deviate because actual deal or tranche performance is not fully reflected in the projected cash flows/model output.

-- New Century Home Equity Loan Trust 2005-2 , Asset-Backed Notes, Series 2005-2, Class M-5
-- New Century Home Equity Loan Trust 2005-4, Asset-Backed Notes, Series 2005-4, Class M-4
-- New Century Home Equity Loan Trust 2005-4, Asset-Backed Notes, Series 2005-4, Class M-5
-- New Century Home Equity Loan Trust, Series 2005-B, Asset-Backed Pass-Through Certificates, Series 2005-B, Class M-1
-- New Century Home Equity Loan Trust, Series 2005-B, Asset-Backed Pass-Through Certificates, Series 2005-B, Class M-2
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2005-HE1, Asset-Backed Certificates, Series 2005-HE1, Class M-6
-- Park Place Securities Inc., Series 2005-WHQ1, Asset-Backed Pass-Through Certificates, Series 2005-WHQ1, Class M-5
-- Park Place Securities Inc., Series 2005-WHQ1, Asset-Backed Pass-Through Certificates, Series 2005-WHQ1, Class M-6
-- Securitized Asset Backed Receivables LLC Trust 2007-NC2, Mortgage Pass-Through Certificates, Series 2007-NC2, Class A-2B
-- Securitized Asset Backed Receivables LLC Trust 2007-NC2, Mortgage Pass-Through Certificates, Series 2007-NC2, Class A-2C
-- Wells Fargo Home Equity Asset-Backed Securities 2006-3, Trust Home Equity Asset-Backed Certificates, Series 2006-3, Class M-1
-- Wells Fargo Home Equity Asset-Backed Securities 2007-1, Trust Home Equity Asset-Backed Certificates, Series 2007-1, Class A-2
--Wells Fargo Home Equity Asset-Backed Securities 2007-1, Trust Home Equity Asset-Backed Certificates, Series 2007-1, Class A-3

The below tranches materially deviate because of a small loan count.

-- Nomura Asset Acceptance Corporation, Alternative Loan Trust, Series 2005-AR3, Mortgage Pass-Through Certificates, Series 2005-AR3, Class III-A-1
-- Nomura Asset Acceptance Corporation, Alternative Loan Trust, Series 2005-AR3, Mortgage Pass-Through Certificates, Series 2005-AR3, Class III-A-2

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

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The credit rating methodologies used in the analysis of these transactions can be found at: https://dbrs.morningstar.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
-- 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

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