Morningstar DBRS Finalizes Provisional Credit Ratings on PRET 2025-RPL1 Trust

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the PRET 2025-RPL1 Trust Mortgage-Backed Notes, Series 2025-RPL1 (the Notes) issued by PRET 2025-RPL1 Trust (PRET 2025-RPL1 or the Trust) as follows:

-- $315.5 million Class A-1 at AAA (sf)
-- $24.6 million Class A-2 at AA (sf)
-- $340.1 million Class A-3 at AA (sf)
-- $362.6 million Class A-4 at A (sf)
-- $381.3 million Class A-5 at BBB (sf)
-- $22.5 million Class M-1 at A (sf)
-- $18.7 million Class M-2 at BBB (sf)
-- $11.3 million Class B -1 at BB (sf)
-- $7.9 million Class B -2 at B (sf)

The Class A-3, Class A-4, and Class A-5 Notes are exchangeable. These classes can be exchanged for combinations of initial exchangeable notes as specified in the offering documents.

The AAA (sf) credit rating on the Notes reflects 25.75% of credit enhancement provided by subordinated notes. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) credit ratings reflect 19.95%, 14.65%, 10.25%, 7.60%, and 5.75% 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 seasoned performing and reperforming first-lien residential mortgages funded by the issuance of mortgage-backed notes (the Notes). The Notes are backed by 2,151 loans with a total principal balance of $424,874,071 as of the Cut-Off Date (December 31, 2024).

The mortgage loans are approximately 190 months seasoned. As of the Cut-Off Date, 93.8% of the loans are current (including 2.0% bankruptcy-performing loans), and 6.2% of the loans are 30 days delinquent (including one bankruptcy loan) under the Mortgage Bankers Association (MBA) delinquency method. Under the MBA delinquency method, 49.8% and 79.2% of the mortgage loans have been zero times 30 days delinquent for the past 24 months and 12 months, respectively.

The portfolio contains 81.9% modified loans as determined by the Issuer. Morningstar DBRS considers the modifications happened more than two years ago for 87.4% of these loans. Within the pool, 650 mortgages have an aggregate non-interest-bearing deferred amount of $24,962,873 which comprises 5.9% of the total principal balance.

PRET 2025-RPL1 represents the fifth rated securitization of the seasoned performing and reperforming residential mortgage loans issued by the Sponsor, Nomura Corporate Funding Americas, LLC (NCFA or the Sponsor), but the third on the PRET shelf. The Sponsor is registered with the U.S. Securities and Exchange Commission and incorporated in the state of Delaware.

The Mortgage Loan Seller will contribute the loans to the Trust through Nomura Asset Depositor Company, LLC (the Depositor). As the Sponsor, NCFA or one of its majority-owned affiliates will acquire and retain a 5% vertical interest in each class of Notes (other than the Class R Notes) and the Trust Certificate to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder.

All of the loans are being serviced by Selene Finance LP (Selene). There will not be any advancing of delinquent principal and interest (P&I) on any mortgages by the Servicer or any other party to the transaction; however, the Servicer is obligated to make advances in respect of homeowners association (HOA) fees in super lien states and, in certain cases, taxes and insurance as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.

The Controlling Holder will have the option to repurchase any mortgage loan that becomes 90+ days DQ or any REO property at a price equal to the sum of (i) UPB plus interest (ii) any outstanding Post-Cut-Off ate Deferred Amount, and (iii) any Pre-Existing Servicing Advances, unreimbursed Servicing Advances or unpaid Servicing Fees with respect to such Mortgage Loan, as long as the aggregate repurchased DQ mortgages and REO properties do not exceed 10.0% of the aggregate UPB of the Mortgage Loans as of the Cut-Off Date.

On any Payment Date on or after the Payment Date in January 2027, the Redemption Right Holder will have the option to purchase all remaining loans and other property of the Issuer at the Redemption Price. The Redemption Right Holder will be the beneficial owner of more than 50% the Class XS Notes.

The transaction employs a sequential-pay cash flow structure. Principal proceeds can be used to cover interest shortfalls on the Notes, but such shortfalls on Class A-2 and more subordinate P&I bonds will not be paid from principal proceeds until the more senior classes are retired.

The credit ratings reflect transactional strengths that include the following:
-- Loan-to-value ratios,
-- Satisfactory third-party due-diligence review,
-- Seasoning, and
-- Structural features.

The transaction also includes the following challenges:
-- Representations and warranties standard,
-- No servicer advances of delinquent P&I, and
-- Assignments and endorsements.

Morningstar DBRS' credit rating on the Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are for each of the rated Notes are the related Interest Payment Amount, the Interest Carryforward Amount, and the Note Amount.

Morningstar DBRS' credit ratings on Classes A-1, A-2, M-1 and M-2 also address the credit risk associated with the increased rate of interest applicable to Classes A-1, A-2, M-1 and M-2 if they remain outstanding on the step-up date (February 2029) in accordance with the applicable transaction documents.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, in this transaction, Morningstar DBRS' credit ratings do not address the payment of any Cap Carryover Amounts.

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 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 (January 02, 2025) https://dbrs.morningstar.com/research/445477.

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.

-- RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating (January 2, 2025),
https://dbrs.morningstar.com/research/445477
-- 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 (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

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.