Morningstar DBRS Finalizes Its Provisional Credit Ratings on Cascade Funding Mortgage Trust 2024-RM5

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following Mortgage-Backed Notes, Series 2024-RM5 issued by Cascade Funding Mortgage Trust 2024-RM5:

-- $483.0 million Class A at AAA (sf)
-- $46.0 million Class M1 at AA (low) (sf)
-- $36.3 million Class M2 at A (low) (sf)
-- $36.5 million Class M3 at BBB (low) (sf)
-- $9.0 million Class M4A at BB (sf)
-- $18.8 million Class M4B at BB (low) (sf)
-- $17.5 million Class M5 at B (sf)

The AAA (sf) credit rating reflects 24.9% of credit enhancement. The AA (low) (sf), A (low) (sf), BBB (low) (sf), BB (sf), BB (low) (sf), and B (sf) credit ratings reflect 17.7%, 12.1%, 6.4%, 5.0%, 2.1%, and -0.6% of credit enhancement, respectively.

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

Lenders typically offer reverse mortgage loans to people who are at least 62 years old. Through reverse mortgage loans, borrowers have access to home equity through a lump sum amount or a stream of payments without periodically repaying principal or interest, allowing the loan balance to accumulate over a period of time until a maturity event occurs. Loan repayment is required (1) if the borrower dies, (2) if the borrower sells the related residence, (3) if the borrower no longer occupies the related residence for a period (usually a year), (4) if it is no longer the borrower's primary residence, (5) if a tax or insurance default occurs, or (6) if the borrower fails to properly maintain the related residence. In addition, borrowers must be current on any homeowner's association (HOA) dues if applicable. Reverse mortgages are typically nonrecourse; borrowers do not have to provide additional assets in cases where the outstanding loan amount exceeds the property's value (the crossover point). As a result, liquidation proceeds will fall below the loan amount in cases where the outstanding balance reaches the crossover point, contributing to higher loss severities for these loans.

As of the October 1, 2024, cut-off date, the collateral has approximately $643.01 million in unpaid principal balance from 640 active and inactive reverse mortgage loans secured by first liens typically on single-family residential properties, condominiums, multifamily (two- to four-family) properties, manufactured homes, planned unit developments, co-ops, and townhouses. The loans were originated between 2002 and 2008. Of the total loans, 33 have a fixed interest rate (9.45% of the balance), with a 9.37% weighted-average coupon (WAC). The remaining 607 loans are adjustable rate (90.55% of the balance) with a 9.29% WAC, bringing the entire collateral pool to a 9.30% WAC.

The transaction comprises loans that were originally securitized in the CFMT 2018-RM2 and CFMT 2019-RM3 transactions. Of the 640 loans in this deal, 412 (58.59% of the balance) are conveyed from the CFMT 2018-RM2 transaction and the remaining 228 loans (41.41% of the balance) are conveyed from the CFMT 2019-RM3 transaction.

As of the initial cut-off date, 552 loans in this transaction are active (87.11% of the balance) and the remaining 88 (12.89%) are inactive. There are 47 mortgage assets that are in the foreclosure process (6.76%), 10 are real estate owned (1.27%), 15 are in default (2.13%), and two are in bankruptcy (0.14%). The weighted-average loan-to-value ratio (LTV) of the active loans is 66.17% and 64.13% for the inactive loans, bringing the entire collateral pool to a 67.21% LTV.

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 Certificates are the related Interest Accrual Amount and Note Amount.

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, the credit ratings on the Notes do not address Additional Accrued Amounts based on their 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/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 rating is Rating and Monitoring U.S. Reverse Mortgage Securitizations (September 30, 2024), https://dbrs.morningstar.com/research/440088.

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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info-DBRS@morningstar.com.

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.

-- 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 (October 28, 2024), https://dbrs.morningstar.com/research/441840
-- Operational Risk Assessment for U.S. RMBS Originators and Servicers (September 30, 2024), https://dbrs.morningstar.com/research/440086
-- Third-Party Due-Diligence and Representations & Warranties Criteria for U.S. RMBS Transactions (September 30, 2024), https://dbrs.morningstar.com/research/440091

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