Morningstar DBRS Assigns Provisional Credit Ratings to Towd Point Mortgage Trust 2025-CRM1

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following Asset-Backed Securities, Series 2025-CRM1 (the Notes) to be issued by Towd Point Mortgage Trust 2025-CRM1 (TPMT 2025-CRM1 or the Trust):

-- $251.2 million Class A1 at (P) AAA (sf)
-- $22.3 million Class A2 at (P) AA (high) (sf)
-- $16.3 million Class M1 at (P) A (sf)
-- $13.8 million Class M2 at (P) BBB (low) (sf)
-- $10.3 million Class B1 at (P) BB (low) (sf)
-- $6.3 million Class B2 at (P) B (sf)
-- $22.3 million Class A2A at (P) AA (high) (sf)
-- $22.3 million Class A2AX at (P) AA (high) (sf)
-- $22.3 million Class A2B at (P) AA (high) (sf)
-- $22.3 million Class A2BX at (P) AA (high) (sf)
-- $22.3 million Class A2C at (P) AA (high) (sf)
-- $22.3 million Class A2CX at (P) AA (high) (sf)
-- $22.3 million Class A2D at (P) AA (high) (sf)
-- $22.3 million Class A2DX at (P) AA (high) (sf)
-- $16.3 million Class M1A at (P) A (sf)
-- $16.3 million Class M1AX at (P) A (sf)
-- $16.3 million Class M1B at (P) A (sf)
-- $16.3 million Class M1BX at (P) A (sf)
-- $16.3 million Class M1C at (P) A (sf)
-- $16.3 million Class M1CX at (P) A (sf)
-- $16.3 million Class M1D at (P) A (sf)
-- $16.3 million Class M1DX at (P) A (sf)
-- $13.8 million Class M2A at (P) BBB (low) (sf)
-- $13.8 million Class M2AX at (P) BBB (low) (sf)
-- $13.8 million Class M2B at (P) BBB (low) (sf)
-- $13.8 million Class M2BX at (P) BBB (low) (sf)
-- $13.8 million Class M2C at (P) BBB (low) (sf)
-- $13.8 million Class M2CX at (P) BBB (low) (sf)
-- $13.8 million Class M2D at (P) BBB (low) (sf)
-- $13.8 million Class M2DX at (P) BBB (low) (sf)

The (P) AAA (sf) credit rating on the Notes reflects 24.60% of credit enhancement provided by subordinated notes. The (P) AA (high) (sf), (P) A (sf), (P) BBB (low) (sf), (P) BB (low) (sf), and (P) B (sf) credit ratings reflect 17.90%, 13.00%, 8.85%, 5.75%, and 3.85% of credit enhancement, respectively.

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

TPMT 2025-CRM1 is a securitization of a portfolio of fixed, prime and near-prime, closed-end second-lien (CES) and first- and junior-lien revolving home equity lines of credit (HELOCs) residential mortgages funded by the issuance of the Asset-Backed Securities, Series 2025-CRM1 (the Notes). The Notes are backed by 3,868 mortgage loans with a total principal balance of $333,157,392 (CES mortgage loans totaling to $242,944,527 as of the CES Mortgage Cut-Off Date (January 1, 2025), and HELOC total outstanding balance of $90,212,865 as of the HELOC Loan Mortgage Cut-off Date (December 31, 2024).

TPMT 2025-CRM1 represents the ninth junior lien securitization by FirstKey Mortgage, LLC and first by CRM 2 Sponsor, LLC. Spring EQ, LLC (Spring EQ; 76.5%) is the top originator for the mortgage pool.

Newrez, LLC d/b/a Shellpoint Mortgage Servicing (Shellpoint; 84.9%) and loanDepot.com LLC (loanDepot; 15.1%) are the Servicers of the loans in this transaction.

U.S. Bank Trust Company, National Association (rated AA with a Stable trend by Morningstar DBRS) will act as the Indenture Trustee, Paying Agent, Administrative Trustee, Note Registrar, and Administrator. U.S. Bank National Association and Computershare Trust Company, N.A. (rated BBB (high) with a Stable trend by Morningstar DBRS) will act as the Custodians.

CRM 2 Sponsor, LLC (CRM) will acquire the loans from various transferring trusts on the Closing Date. The transferring trusts acquired the mortgage loans from the Originators. CRM and the transferring trusts are beneficially owned by funds managed by affiliates of Cerberus Capital Management, L.P. Upon acquiring the loans from the transferring trusts, CRM will transfer the loans to CRM 2 Depositor, LLC (the Depositor). The Depositor in turn will transfer the loans to Towd Point Mortgage Grantor Trust 2025-CRM1 (the Grantor Trust). The Grantor Trust will issue two classes of certificates - P&I Grantor Trust Certificate and IO Grantor Trust Certificate. The Grantor Trust certificates will be issued in the name of the Issuer. The Issuer will pledge P&I Grantor Trust Certificate with the Indenture Trustee and will be the primary asset of the Trust. As a Sponsor, CRM, through one or more majority-owned affiliates, will acquire and retain a 5% eligible vertical interest in each class of securities to be issued (other than Class D or any residual certificates) to satisfy the credit risk retention requirements.

Although the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau's (CFPB) Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government, or private-label nonagency prime jumbo products for various reasons. In accordance with the Qualified Mortgage (QM)/ATR rules, 9.3% of the loans are designated as non-QM, 11.6% are designated as QM Rebuttable Presumption, and 50.7% are designated as QM Safe Harbor. Approximately 1.3% and 27.1% of the mortgages are loans made to investors for business purposes and HELOC loans, respectively, and were not subject to the QM/ATR rules.

For the CES mortgage loans, the Servicers will generally fund advances of delinquent principal and interest (P&I) on any mortgage until such loan becomes 60 days delinquent under the Office of Thrift Supervision (OTS) delinquency method (equivalent to 90 days delinquent under the Mortgage Bankers Association (MBA) delinquency method), contingent upon recoverability determination. However, the Servicer will stop advancing delinquent P&I if the aggregate amount of unreimbursed P&I advances owed to a Servicer exceeds 90.0% of the amounts on deposit in the custodial account maintained by such Servicer. For the HELOC mortgage loans, there will not be any advancing of delinquent principal or interest on any mortgages by the Servicers. In addition, for all the mortgage loans, the related servicer may be obligated to make advances in respect of homeowner association fees, taxes, and insurance, installment payments on energy improvement liens, and reasonable costs and expenses incurred in the course of servicing and disposing of properties unless a determination is made that there will be material recoveries.

For this transaction, any junior lien loan that is 150 days delinquent under the OTS delinquency method (equivalent to 180 days delinquent under the MBA delinquency method), upon review by the related Servicer, may be considered a Charged Off Loan. With respect to a Charged Off Loan, the total unpaid principal balance will be considered a realized loss and will be allocated reverse sequentially to the Noteholders. If there are any subsequent recoveries for such Charged Off Loans, the recoveries will be included in the principal remittance amount and applied in accordance with the principal distribution waterfall; in addition, any class principal balances of Notes that have been previously reduced by allocation of such realized losses may be increased by such recoveries sequentially in order of seniority. Morningstar DBRS' analysis assumes reduced recoveries upon default on loans in this pool.

This transaction incorporates a sequential-pay cash flow structure. Principal proceeds and excess interest can be used to cover interest shortfalls on the Notes, but such shortfalls on Class A2 and subordinate bonds will not be paid from principal proceeds until the Class A1 Notes are retired.

On or after (1) the payment date in January 2028 or (2) the first payment date when the aggregate pool balance of the mortgage loans (other than the Charged Off Loans and the REO properties) is reduced to less than 30.0% of the Cut-Off Date balance, the call option holder will have the option to purchase P&I Grantor Trust Certificate so long as the aggregate proceeds from such purchase exceeds the minimum price (Optional Redemption). Minimum price will at least equal sum of (A) class balances of the Notes plus the accrued interest and unpaid interest, (B) any fees, expenses and indemnification amounts, and (C) accrued and unpaid amounts owed to the Class X Certificates minus the Class AX distributable amount.

On or after the first payment date on which the aggregate pool balance of the mortgage loans and the REO properties is less than 10% of the aggregate pool balance as of the Cut-Off Date, the call option holder will have the option to purchase P&I Grantor Trust Certificate at the minimum price (Clean-Up Call).

Approximately 4.6% of the mortgage pool contains loans secured by mortgage properties that are located within zip codes identified by FEMA as having been affected by the California wildfires. Each of the mortgaged property located in these zip codes were inspected prior to the Closing Date. Each such property inspection report came back with no damage as of the date of such reports. The transaction documents also include representations and warranties regarding the property conditions, which state that the properties have not suffered damage that would have a material and adverse impact on the values of the properties (including events such as water, fire, earthquake, earth movement other than earthquake, windstorm, flood, tornado or similar casualty).

The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios for Rated Sovereigns December 2024 Update, published on December 19, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.

The credit ratings reflect transactional strengths that include the following:
-- Robust equity and prime/near-prime credit quality;
-- Certain second-lien attributes;
-- Satisfactory third-party due-diligence review;
-- Current loan status; and
-- Improved underwriting standards.

The transaction also includes the following challenges:
-- Representations and warranties framework;
-- Limited or no Advances of Delinquent P&I
-- Holder of the Class D Certificates May Fail to Reimburse the Servicer for Draws; and
-- Limited third-party diligence valuation review.

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 related Current Interest, Interest Shortfall, and the related Class Principal Balance on non-interest only tranches.

Morningstar DBRS' credit ratings on Classes A1, A2, and M1 also addresses the credit risk associated with the increased rate of interest applicable to these Notes 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 Net WAC Shortfalls.

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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned Notes and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned Notes are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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 (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

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