Morningstar DBRS Upgrades Three Credit Ratings, Confirms Four Credit Ratings on Prime Structured Mortgage (PriSM) Trust, Series 2021-1

DBRS Limited (Morningstar DBRS) upgraded its credit ratings on the following Mortgage-Backed Certificates, Series 2021-1 issued by Prime Structured Mortgage (PriSM) Trust:

-- Mortgage-Backed Certificates, Series 2021-1, Class C (the Class C Certificates) to AA (low) (sf) from A (high) (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class D (the Class D Certificates) to A (low) (sf) from BBB (high) (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class E (the Class E Certificates; together with the Class C Certificates, the Class D Certificates, the Upgraded Certificates) to BBB (low) (sf) from BB (high) (sf)

In addition, Morningstar DBRS confirmed its credit ratings on the following certificates:

-- Mortgage-Backed Certificates, Series 2021-1, Class A (the Class A Certificates) at AAA (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class VFC (the Class VFC Certificates) at AAA (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class IO (the Class IO Certificates) at AAA (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class B (the Class B Certificates) at AA (sf)
-- Mortgage-Backed Certificates, Series 2021-1, Class F (the Class F Certificates; together with the Class A Certificates, the Class VFC Certificates, the Class IO Certificates, the Class B Certificates, and the Upgraded Certificates, the Rated Certificates) at B (sf)

The credit ratings on the Class A Certificates, the Class VFC Certificates (together with the Class A Certificates, the Senior Principal Certificates), the Class B Certificates, the Class C Certificates, the Class D Certificates, the Class E Certificates, and the Class F Certificates represent the timely payment of interest to the holders thereof and the ultimate payment of principal by the Rated Final Distribution Date under the respective credit rating stress. The credit rating on the Class IO Certificates is an opinion that addresses the likelihood of the Notional Amount of the Class IO Certificates' applicable reference certificates (i.e., the Senior Principal Certificates) being adversely affected by credit losses.

The Mortgage-Backed Certificates, Series 2021-1, Class G (the Class G Certificates) and Mortgage-Backed Certificates, Series 2021-1, Class R (collectively with the Class G Certificates and the Rated Certificates, the Certificates) are not rated by Morningstar DBRS.

The credit rating confirmations are based on the following factors:

(1) The collateral comprises a pool of first-lien, fixed-rate, prime, B-20-compliant, uninsured Canadian residential mortgages with a maximum loan-to-value (LTV) ratio of 80% at origination. The total outstanding note balance was $485.6 million as of September 2024, representing a pool factor of 72.0%. The pass-through structure of the Certificates has resulted in higher subordination across the Rated Certificates.

(2) Credit enhancement provided by subordination has built up since issuance, providing protection to the Certificates.

(3) Credit performance since inception has been stable with no reported losses. The transaction benefits from strong asset quality consisting of prime conventional mortgages with high credit scores and low LTV ratios. Losses are allocated to the lowest-ranking Certificates outstanding.

(4) TD Securities Inc., a wholly owned subsidiary of The Toronto-Dominion Bank (rated AA (high) with a Negative trend by Morningstar DBRS), is the Seller and Master Servicer and provides representations and warranties and is ultimately responsible for all the servicing obligations of the mortgages. First National Financial LP (rated BBB with a Stable trend by Morningstar DBRS), CMLS Financial Ltd., Paradigm Quest Inc., and MCAP Service Corporation, together ultimately servicing the Mortgage Loans as either Sub-Servicers or sub-sub-servicers, have extensive servicing experience in the Canadian residential mortgage market.

The credit ratings on the Class D Certificates materially deviate from higher credit ratings implied by the quantitative results. Morningstar DBRS considers a material deviation to be a credit rating differential of three or more notches between the assigned credit rating and the credit rating implied by the quantitative results that is a substantial component of a credit rating methodology. The deviations are warranted as Morningstar DBRS recognizes the structural subordination of the Class D Certificates to the Class C Certificates.

Morningstar DBRS monitors the performance of each transaction to identify any deviation from its expectations at issuance and to ensure that the credit ratings remain appropriate. The review is predicated upon the timely receipt of performance information from the related providers. The performance and characteristics of the pool and the Certificates are available and updated each month in the Monthly Canadian ABS Report available at https://dbrs.morningstar.com.

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.

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

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Master Canadian Structured Finance Surveillance Methodology
(August 06, 2024) https://dbrs.morningstar.com/research/437538.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

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 Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

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

Legal and Derivatives Criteria for Canadian Structured Finance (August 12, 2024)
https://dbrs.morningstar.com/research/437761

Operational Risk Assessments for Canadian Structured Finance (August 06, 2024)
https://dbrs.morningstar.com/research/437547

Rating Canadian Residential Mortgages, Home Equity Lines of Credit and Reverse Mortgages (October 29, 2024)
https://dbrs.morningstar.com/research/441940

DBRS Canadian RMBS Model 5.0.1.1 (https://dbrs.morningstar.com/models/)

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/410863.

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