Morningstar DBRS Upgrades and Confirms Credit Ratings on Genesis Mortgage Funding 2022-1 plc

DBRS Ratings Limited (Morningstar DBRS) took the following credit rating actions on the notes issued by Genesis Mortgage Funding 2022-1 plc (the Issuer):

-- Class A confirmed at AAA (sf)
-- Class B upgraded to AAA (sf) from AA (high) (sf)
-- Class C upgraded to AA (sf) from A (high) (sf)
-- Class D upgraded to A (sf) from BBB (high) (sf)
-- Class E upgraded to BBB (low) (sf) from BB (high) (sf)

The credit ratings on Class A and Class B notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in September 2059. The credit ratings on the Class C, Class D, and Class E notes address the ultimate payment of interest and principal, and the timely payment of interest while the senior-most class outstanding, on or before the legal final maturity date.

CREDIT RATING RATIONALE
The credit rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the September 2024 payment date.
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective credit rating levels.

The transaction is the second securitisation of residential mortgages originated by Bluestone Mortgage Limited (BML). The asset portfolio comprises first-lien owner-occupied and buy-to-let (BTL) mortgages, originated by BML and secured by properties in the United Kingdom. BML is the mortgage portfolio servicer. To maintain servicing continuity, CSC Capital Markets UK Limited acts as the backup servicer facilitator.

PORTFOLIO PERFORMANCE
As of the September 2024 payment date, loans two to three months in arrears represented 2.3% of the outstanding portfolio balance, and loans more than three months in arrears represented 8.9%. Cumulative defaults amounted to 0.2% of the original portfolio balance.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted an analysis of the current pool of receivables and updated its base-case PD and LGD assumptions at the B (sf) credit rating level to 12.3% and 4.8%, respectively.

CREDIT ENHANCEMENT
As of the September 2024 payment date, the credit enhancement available to the Class A, Class B, Class C, Class D, and Class E notes was 32.7%, 23.4%, 16.1%, 11.5%, and 6.8%, respectively, compared with 20.6%, 14.9%, 10.5%, 7.7%, and 4.8%, at closing, respectively. Credit enhancement consists of subordination of the junior notes and a general reserve fund (GRF). The increase of credit enhancement prompted the upgrades on the rated notes.

The GRF is currently funded to its target level of GBP 2.0 million, equal to 1.5% of the outstanding balance of the Class A to Class F notes. The GRF is available to cover senior fees, interest shortfalls, and principal losses via the principal deficiency ledgers on the notes.

The liquidity reserve fund (LRF) was funded on the first interest payment date using available principal funds and is currently funded to its target level of GBP 1.4 million, equal to 1.5% of the outstanding balance of the Class A notes. The LRF is available to cover senior fees and interest shortfall on the Class A notes.

Citibank N.A./London Branch acts as the account bank for the transaction. Based on the Morningstar DBRS private credit rating of Citibank N.A./London Branch, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the Class A notes, as described in Morningstar DBRS' " Legal and Derivative Criteria for European Structured Finance Transactions " methodology.

NatWest Markets Plc acts as the swap counterparty for the transaction. Morningstar DBRS' Long-Term Critical Obligations Rating of NatWest Markets Plc at AA (low) is above the First Rating Threshold as described in Morningstar DBRS' " Legal and Derivative Criteria for European Structured Finance Transactions " methodology.

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
Social (S) Factors
Morningstar DBRS considers the help-to-buy (HTB) scheme applicable to 13.1% of loans in the portfolio to be a relevant social factor (social impact of products and services) as outlined in the "Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings". The HTB scheme is credit negative, but Morningstar DBRS does not consider this to be a significant social factor as it does not affect the credit rating, given the generally limited exposure to HTB loans in this transaction.

There were no Environmental/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 https://dbrs.morningstar.com/research/437781 .

Morningstar DBRS analysed the transaction structure in Intex Dealmaker.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the credit ratings is: "Master European Structured Finance Surveillance Methodology" (19 November 2024) https://dbrs.morningstar.com/research/443204.

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

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include investor reports and loan-level data provided by Citibank N.A./London Branch and EuroABS Ltd, respectively.

Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit rating, Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this issuer took place on 6 December 2023, when Morningstar DBRS confirmed the credit ratings on the Class A, Class B, Class C, Class D and Class E Notes at AAA (sf), AA (high) (sf), A (high) (sf), BBB (high) (sf) and BB (high) (sf), respectively, and upgraded its credit rating on the Class X notes to A (low) (sf) from BB (low) (sf).

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):
-- Morningstar DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuers at the B (sf) credit rating level are 12.3% and 4.8%, respectively:
-- The risk sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base case assumptions.

Class A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

Class B Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (low) (sf)
-- 50% increase in PD, expected credit rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (low) (sf)

Class C Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (high) (sf)

Class D Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (sf)
-- 50% increase in LGD, expected credit rating of A (sf)
-- 25% increase in PD, expected credit rating of A (low) (sf)
-- 50% increase in PD, expected credit rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)

Class E Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD, expected credit rating of BB (high) (sf)
-- 50% increase in PD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (sf)

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Petter Wettestad, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 21 April 2022

DBRS Ratings Limited
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Tel. +44 (0) 20 7855 6600
Registered and incorporated under the laws of England and Wales: Company No. 7139960

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

-- Master European Structured Finance Surveillance Methodology (19 November 2024)
https://dbrs.morningstar.com/research/443204
-- European RMBS Insight Methodology (18 September 2024) and European RMBS Insight Model v10.0.0.0
https://dbrs.morningstar.com/research/439573
-- European RMBS Insight: UK Addendum (16 August 2024)
https://dbrs.morningstar.com/research/437988
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024)
https://dbrs.morningstar.com/research/439913
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024)
https://dbrs.morningstar.com/research/443196
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024)
https://dbrs.morningstar.com/research/439571
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024)
https://dbrs.morningstar.com/research/437781

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/439604.

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