Morningstar DBRS Finalizes Its Provisional Credit Ratings on EFMT 2024-RM3

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the Asset-Backed Notes, Series 2024-RM3 (the Certificates) issued by EFMT 2024-RM3 as follows:

-- $188.2 million Class A-1A at AAA (sf)
-- $27.2 million Class A-1B at AAA (sf)
-- $9.3 million Class A-2 at AA (sf)
-- $9.3 million Class A-3 at A (sf)
-- $9.2 million Class B-1 at BBB (sf)

The AAA (sf) credit rating reflects 108.7% of cumulative advance rate. The AA (sf), A (sf), and BBB (sf) credit ratings reflect 113.4%, 118.1%, and 122.8% of cumulative advance rates, 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 dues if applicable. Reverse mortgages are typically nonrecourse; borrowers don't 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 November 1, 2024, cut-off date, the collateral consists of approximately $198.1 million in unpaid principal balance (UPB) from 252 performing and one nonperforming, nonrecourse, fixed-rate, and adjustable-rate jumbo reverse mortgage loans secured by first liens on single-family residential properties, condominiums, multifamily (two- to four-family), and townhouse properties. All loans were originated between 2023 and 2024. Out of the 253 loans, 142 (68.46% of the UPB) are fixed-rate loans with a weighted-average coupon (WAC) of 9.694% and 111 (31.54%) are adjustable-rate mortgages with a WAC of 10.585%, bringing the total pool WAC to 9.975%.

The transaction uses a structure in which cash distributions are applied on a pro rata basis to each rated note until the rated amounts with respect to such notes are paid off, provided that a Sequential Pay Trigger Event is not in effect. On each payment date for which a Sequential Pay Trigger Event is in effect, payments of interest will be made first to the Class A-1A and Class A-1B notes on a pro rata basis and then sequentially to the Class A-2, Class A-3, and Class B-1 notes until all amounts of interest due to each class have been paid in full. Payments on the notes will be made sequentially to the Class A-1A, Class A-1B, Class A-2, Class A-3, and Class B-1 notes in that order until all amounts due on the notes are reduced to zero. The Class A-1A, Class A-1B, Class A-2, Class A-3, and Class B-1 notes will accrue cap carryover for any interest shortfalls, except that, with respect to the Class A-1A, Class A-1B, Class A-2, Class A-3, and Class B-1 notes, timely interest payments are expected to be made using the interest reserve funds in any period in which there are insufficient available funds.

A Sequential Pay Trigger Event will occur if the Fundamental OC Multiple is below the Fundamental OC Multiple Threshold applicable to such payment date.

Morningstar DBRS' credit ratings on the Certificates 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, Cap Carryover 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.

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.
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
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064
-- 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.