Morningstar DBRS Confirms Credit Ratings on Two North Texas Higher Education Authority, Inc. Student Loan Transactions

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the following classes of securities included in two North Texas Higher Education Authority, Inc. student loan transactions:

CREDIT RATING RATIONALE

The credit rating actions are based on the following analytical considerations:

-- Transaction capital structure, current ratings, and sufficient credit enhancement levels.

-- Credit enhancement is in the form of overcollateralization, a reserve account, a capitalized interest fund and excess spread, with senior notes also benefiting from the subordination of junior notes.

-- The current level of hard credit enhancement is sufficient to support the Morningstar DBRS projected remaining cumulative net loss assumption at a multiple of coverage commensurate with the ratings.

-- Forbearance, deferment and delinquency levels remain relatively stable.

-- Over the past few quarters, the transaction experienced an increase in initial claim rejections due to certain operational issues related to a servicing transfer that occurred last year. The issuer has stated that the claims were paid after being resubmitted to the related guarantors. Further, the issuer has stated that they have a process is in place to mitigate the risk of initial claim submissions being rejected.

-- Collateral performance in terms of cumulative net losses (CNLs) is within expectations as Federal Family Education Loan Program (FFELP) student loans benefit from guarantees that are ultimately provided by the U.S. government for at least 97% of principal and accrued interest.

-- 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.

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

Notes:
The principal methodology applicable to the credit ratings is Morningstar DBRS Master U.S. ABS Surveillance (06 August 2024) https://dbrs.morningstar.com/research/437535

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

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

The rated entity or its related entities did participate in the credit ratings 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 ratings action.

These are solicited credit ratings.

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

DBRS, Inc.
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The credit ratings methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

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.

-- Operational Risk Assessment for U.S. ABS Originators and Servicers (August 6, 2024),
https://dbrs.morningstar.com/research/437545
-- 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
-- Rating U.S. Structured Finance Transactions (August 6, 2024),
https://dbrs.morningstar.com/research/437571
-- Rating U.S. Federal Family Education Loan Program Securitizations (August 6, 2024),
https://dbrs.morningstar.com/research/437553

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