Morningstar DBRS Finalizes Provisional Credit Ratings on RATE Mortgage Trust 2024-J4

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the Mortgage-Backed Notes, Series 2024-J4 (the Notes) issued by RATE Mortgage Trust 2024-J4 (RATE 2024-J4, or the Trust) as follows:

-- $310.5 million Class A-1 at AAA (sf)
-- $310.5 million Class A-2 at AAA (sf)
-- $310.5 million Class A-3 at AAA (sf)
-- $232.9 million Class A-4 at AAA (sf)
-- $232.9 million Class A-5 at AAA (sf)
-- $232.9 million Class A-6 at AAA (sf)
-- $186.3 million Class A-7 at AAA (sf)
-- $186.3 million Class A-8 at AAA (sf)
-- $186.3 million Class A-9 at AAA (sf)
-- $46.6 million Class A-10 at AAA (sf)
-- $46.6 million Class A-11 at AAA (sf)
-- $46.6 million Class A-12 at AAA (sf)
-- $124.2 million Class A-13 at AAA (sf)
-- $124.2 million Class A-14 at AAA (sf)
-- $124.2 million Class A-15 at AAA (sf)
-- $77.6 million Class A-16 at AAA (sf)
-- $77.6 million Class A-17 at AAA (sf)
-- $77.6 million Class A-18 at AAA (sf)
-- $38.9 million Class A-19 at AAA (sf)
-- $38.9 million Class A-20 at AAA (sf)
-- $38.9 million Class A-21 at AAA (sf)
-- $349.4 million Class A-22 at AAA (sf)
-- $349.4 million Class A-23 at AAA (sf)
-- $349.4 million Class A-24 at AAA (sf)
-- $349.4 million Class A-25 at AAA (sf)
-- $349.4 million Class A-X-1 at AAA (sf)
-- $310.5 million Class A-X-2 at AAA (sf)
-- $310.5 million Class A-X-3 at AAA (sf)
-- $310.5 million Class A-X-4 at AAA (sf)
-- $232.9 million Class A-X-5 at AAA (sf)
-- $232.9 million Class A-X-6 at AAA (sf)
-- $232.9 million Class A-X-7 at AAA (sf)
-- $186.3 million Class A-X-8 at AAA (sf)
-- $186.3 million Class A-X-9 at AAA (sf)
-- $186.3 million Class A-X-10 at AAA (sf)
-- $46.6 million Class A-X-11 at AAA (sf)
-- $46.6 million Class A-X-12 at AAA (sf)
-- $46.6 million Class A-X-13 at AAA (sf)
-- $124.2 million Class A-X-14 at AAA (sf)
-- $124.2 million Class A-X-15 at AAA (sf)
-- $124.2 million Class A-X-16 at AAA (sf)
-- $77.6 million Class A-X-17 at AAA (sf)
-- $77.6 million Class A-X-18 at AAA (sf)
-- $77.6 million Class A-X-19 at AAA (sf)
-- $38.9 million Class A-X-20 at AAA (sf)
-- $38.9 million Class A-X-21 at AAA (sf)
-- $38.9 million Class A-X-22 at AAA (sf)
-- $349.4 million Class A-X-23 at AAA (sf)
-- $349.4 million Class A-X-24 at AAA (sf)
-- $349.4 million Class A-X-25 at AAA (sf)
-- $349.4 million Class A-X-26 at AAA (sf)
-- $4.0 million Class B-1 at AA (high) (sf)
-- $4.0 million Class B-1A at AA (high) (sf)
-- $4.0 million Class B-X-1 at AA (high) (sf)
-- $6.8 million Class B-2 at A (low) (sf)
-- $6.8 million Class B-2A at A (low) (sf)
-- $6.8 million Class B-X-2 at A (low) (sf)
-- $2.0 million Class B-3 at BBB (sf)
-- $1.5 million Class B-4 at BB (low) (sf)
-- $731,000 Class B-5 at B (low) (sf)

Classes A-X-1, A-X-2, A-X-3, A-X-4, A-X-5, A-X-6, A-X-7, A-X-8, A-X-9, A-X-10, A-X-11, A-X-12, A-X-13, A-X-14, A-X-15, A-X-16, A-X-17, A-X-18, A-X-19, A-X-20, A-X-21, A-X-22, A-X-23, A-X-24, A-X-25, A-X-26, B-X-1, and B-X-2 are interest-only (IO) notes. The class balances represent notional amounts.

Classes A-1, A-2, A-3, A-4, A-6, A-7, A-8, A-10, A-11, A-13, A-14, A-15, A-16, A-17, A-19, A-20, A-22, A-23, A-24, A-25, A-X-2, A-X-3, A-X-4, A-X-5, A-X-6, A-X-7, A-X-8, A-X-11, A-X-14, A-X-15, A-X-16, A-X-17, A-X-20, A-X-23, A-X-24, A-X-25, A-X-26, B-1, B-X-1 and B-2 are exchangeable classes. These classes can be exchanged for combinations of initial exchangeable notes as specified in the offering documents.

Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-15, A-16, A-17 and A-18 are super senior tranches. These classes benefit from additional protection from the senior support notes (Classes A-19, A-20, and A-21) with respect to loss allocation.

The AAA (sf) credit ratings on the Notes reflect 4.35% of credit enhancement provided by subordinated notes. The AA (high) (sf), A (low) (sf), BBB (sf), BB (low) (sf), and B (low) (sf) credit ratings reflect 3.25%, 1.40%, 0.85%, 0.45%, and 0.25% of credit enhancement, respectively.

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

The Trust is a securitization of a portfolio of first-lien, fixed-rate prime residential mortgages to be funded by the issuance of the Notes. The Notes are backed by 310 loans with a total principal balance of $365,287,243 as of the Cut-Off Date (November 1, 2024).

Guaranteed Rate, Inc. (Guaranteed Rate or GRI), as the Sponsor, began issuing prime jumbo securitizations from its RATE shelf in early 2021 and this transaction represents the ninth prime jumbo RATE deal. The pool consists of fully amortizing fixed-rate mortgages with original terms to maturity of 30 years and a weighted-average loan age of one month.

Guaranteed Rate, which is also the Servicing Administrator and Sponsor of the transaction, originated all of the mortgage loans, and ServiceMac, LLC (ServiceMac) will service the loans. Morningstar DBRS did not conduct an operational risk review of ServiceMac for this transaction. Computershare Trust Company, N.A. (rated BBB with a Stable trend by Morningstar DBRS) will act as the Master Servicer, Loan Agent, Paying Agent, Note Registrar, and Certificate Registrar. Deutsche Bank National Trust Company will act as the Custodian. Wilmington Savings Fund Society, FSB will serve as Trustee.

Similar to the prior RATE securitizations, the Servicing Administrator will fund advances of delinquent principal and interest (P&I) on any mortgage until such loan becomes 120 days delinquent or such P&I advances are deemed to be unrecoverable by the Servicer or the Master Servicer (Stop-Advance Loan). The Servicing Administrator will also fund advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing properties.

The interest entitlements for each class in this transaction are reduced reverse sequentially by the delinquent interest that would have accrued on the Stop-Advance Loans. In other words, investors are not entitled to any interest on such severely delinquent mortgages, unless such interest amounts are recovered. The delinquent interest recovery amounts, if any, will be distributed sequentially to the P&I notes.

The Sponsor will have the option, but not the obligation, to repurchase any mortgage loan that becomes 90 to 120 days delinquent under the Mortgage Bankers Association method at a price equal to par plus interest and unreimbursed servicing advance amounts, provided that such repurchases in aggregate do not exceed 10% of the total principal balance as of the Cut-Off Date.

The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

Morningstar DBRS discontinued and withdrew its credit ratings on Classes A-1L, A-2L, and A-3L Loans initially contemplated in the offering documents, as they were not issued at closing.

The credit ratings reflect transactional strengths that include the following:
-- High-quality credit attributes;
-- Well-qualified borrowers;
-- Satisfactory third-party due-diligence review;
-- Structural enhancements; and
-- 100% current loans.

The transaction also includes the following challenges:
-- Representations and warranties framework;
-- Limited advances of delinquent P&I; and
-- Servicing administrator's financial capabilities.

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 are Interest Payment Amount, Interest Shortfall, and Debt Amount (for Non-IO Notes).

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 US 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 (September 30, 2024) https://dbrs.morningstar.com/research/440090.

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.

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

DBRS, Inc.
140 Broadway, 43rd Floor
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
-- Third-Party Due-Diligence and Representations & Warranties Criteria for U.S. RMBS Transactions (September 30, 2024),
https://dbrs.morningstar.com/research/440091
-- 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 Servicer (September 30, 2024),
https://dbrs.morningstar.com/research/440086

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.

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