Morningstar DBRS Finalizes Provisional Credit Ratings on PRPM 2025-RPL1, LLC

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

-- $150.9 million Class A-1 at AAA (sf)
-- $26.5 million Class A-2 at AA (high) (sf)
-- $15.7 million Class A-3 at A (high) (sf)
-- $15.3 million Class M-1A at BBB (sf)
-- $5.4 million Class M-1B at BBB (low) (sf)
-- $10.4 million Class M-2 at BB (low) (sf)

The AAA (sf) credit rating on the Class A-1 Notes reflects 39.75% of credit enhancement provided by the subordinated notes. The AA (high) (sf), A (high) (sf), BBB (sf), BBB (low) (sf), and BB (low) (sf) credit ratings reflect 29.15%, 22.90%, 16.80%, 14.65%, and 10.50% 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 seasoned performing and reperforming, first-lien residential mortgages, to be funded by the issuance of mortgage-backed notes (the Notes). The Notes are backed by 1,915 loans with a total principal balance of $250,441,427 as of the Cut-Off Date (January 31, 2025).

The mortgage loans are approximately 224 months seasoned. As of the Cut-Off Date, 52.7% of the loans are current under the Mortgage Bankers Association (MBA) delinquency method, including 170 (10.9% of the loans) bankruptcy-performing loans.

Although the number of months clean (consecutively zero times 30 (0 x 30) days delinquent) at issuance is weaker relative to other Morningstar DBRS-rated seasoned transactions, the borrowers demonstrate reasonable cash flow velocity in the past 12 months. Over the past 12 months, 59.2% of the mortgage loans have made 12 or more payments.

Modified loans make up 88.4% of the portfolio. The modifications happened more than two years ago for 88.2% of the modified loans. Within the pool, 346 mortgages (24.8% of the pool by loan count) have a total noninterest-bearing deferred amount of $8,909,935 which equates to approximately 3.6% of the total principal balance.

To satisfy the credit risk retention requirements, as of the Closing Date, the Sponsor or a majority-owned affiliate of the Sponsor, will retain the Membership Certificate, which represent a 100% equity interest in the Issuer, and a requisite amount of the Class B Notes.

SN Servicing Corporation (SNSC, 90.4%) and Nationstar Mortgage LLC dba Rushmore Servicing (Rushmore, 9.6%) will service the loans in this transaction. The Servicers will not advance any delinquent principal and interest (P&I) on the mortgages; however, the Servicers is obligated to make advances in respect of prior liens, insurance, real estate taxes, and assessments as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.

The Issuer has the option to redeem the Notes in full at a price equal to the sum of (1) the remaining aggregate Note Amount; (2) any accrued and unpaid interest due on the Notes through the redemption date (including any Cap Carryover); and (3) any fees and expenses of the transaction parties, including any unreimbursed servicing advances (Redemption Price). Such Optional Redemption may be exercised on or after the payment date in March 2028.

Additionally, a failure to redeem the Notes in full by the Payment Date in March 2030 will trigger a mandatory auction of the underlying certificates (mortgage loans). If the auction fails to elicit sufficient proceeds to make-whole the Notes, another auction will follow every four months for the first year and subsequently auctions will be carried out every six months. If the Asset Manager fails to conduct the auction, holders of more than 50% of the Class M-2 Notes will have the right to appoint an auction agent to conduct the auction.

The transaction employs a sequential-pay cash flow structure with a bullet feature to Class A-2 and more subordinate notes on either the Expected Redemption Date or post a Credit Event. P&I collections are commingled and are first used to pay interest and any Cap Carryover amount to the Notes sequentially and then to pay Class A-1 until its balance is reduced to zero, which may provide for timely payment of interest on certain rated Notes. Class A-2 and below are not entitled to any payments of principal until the Expected Redemption Date or upon the occurrence of a Credit Event, except for remaining available funds representing net sales proceeds of the mortgage loans. Prior to the Expected Redemption Date or an Event of Default, any available funds remaining after Class A-1 is paid in full will be deposited into a Redemption Account. Beginning on the Payment Date in March 2029, the Class A-1 and the other offered Notes will be entitled to its initial Note Rate plus the step-up note rate of 1.00% per annum. If the Issuer does not redeem the rated Notes in full by the payment date in October 2031 or an Event of Default occurs and is continuing, a Credit Event will have occurred. Upon the occurrence of a Credit Event, accrued interest on Class A-2 and the other offered Notes will be paid as principal to Class A-1 or the succeeding senior Notes until it has been paid in full. The redirected amounts will accrue on the balances of the respective Notes and will later be paid as principal payments.

Natural Disasters/Wildfires
With regard to any mortgage loan that may have suffered material damage prior to the Closing Date as a result of the Los Angeles Wildfires, the Sponsor will either remove or repurchase the Potentially Affected Wildfire Property, as defined in the Indenture, prior to the Closing Date within 90 days of receipt of evidence and determination by the Sponsor at the Repurchase Price, as defined in the Indenture, and provide notice to the Indenture Trustee of such repurchase. In addition, the mortgage loan purchase agreement will provide that the Sponsor will order or cause the related Servicer to order a post-disaster inspection for any Potentially Affected Wildfire Property if the mortgagor fails to make any of the first six monthly payments due after the Closing Date within 60 days of the original due date for such payment and if the related mortgaged property is discovered to have material damage that would have a material adverse effect on the value of the related mortgaged property, the Sponsor will be required to repurchase the related mortgage loan within 90 days of receipt of such notice of material damage.

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

The transaction also includes the following challenges:
-- No servicer advances of delinquent principal and interest;
-- Representations and warranties standard; and
-- Assignments, endorsements, and missing documents.

The full description of the strengths, challenges, and mitigating factors is detailed in the related report.

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 are Interest Payment Amount, Cap Carryover Amount, and Note Amount.

Morningstar DBRS' credit rating on the Notes also addresses the credit risk associated with the increased rate of interest applicable to the Notes if the Notes are not redeemed on the Optional Redemption Date (as defined in and) in accordance with the applicable transaction documents.

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 (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.
-- 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.