Morningstar DBRS Assigns Provisional Credit Ratings to Vista Point Securitization Trust 2025-CES1

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following Asset-Backed Securities, Series 2025-CES1 (the Notes) to be issued by Vista Point Securitization Trust 2025-CES1 (VSTA 2025-CES1 or the Trust):

-- $196.0 million Class A-1 at (P) AAA (sf)
-- $14.3 million Class A-2 at (P) AA (sf)
-- $13.6 million Class A-3 at (P) A (sf)
-- $14.3 million Class M-1 at (P) BBB (sf)
-- $12.5 million Class B-1 at (P) BB (sf)
-- $8.1 million Class B-2 at (P) B (sf)

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

The (P) AAA (sf) credit rating on the Notes reflects 27.30% of credit enhancement provided by subordinate Notes. The (P) AA (sf), (P) A (sf), (P) BBB (sf), (P) BB (sf), and (P) B (sf) credit ratings reflect 22.00%, 16.95%, 11.65%, 7.00%, and 4.00% of credit enhancement, respectively.

VSTA 2025-CES1 is a securitization of a portfolio of fixed, prime or expanded-prime, closed-end second-lien (CES) residential mortgages funded by the issuance of the Notes. The Notes are backed by 1,293 mortgage loans with a total principal balance of 269,645,715 as of the Cut-Off Date (February 28, 2025).

The portfolio, on average, is one month seasoned, though seasoning ranges from zero months to 25 months. Borrowers in the pool represent prime and expanded-prime credit quality, with a weighted-average (WA) Morningstar DBRS-calculated FICO score of 728 and an Issuer-provided original combined loan-to-value ratio (CLTV) of 66.3%. The loans were generally originated with Morningstar DBRS defined full documentation standards.

As of the Cut-Off Date, all but 12 loans (0.8% of the pool) were current. Since then, six loans (0.3%) that were 30 days delinquent have self-cured, leaving 0.5% of the pool 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method. Additionally, none of the borrowers are in active bankruptcy.

VSTA 2025-CES1 represents the fourth CES securitization by Vista Point Mortgage, LLC. Vista Point Mortgage, LLC (17.1%), New American Funding, LLC (13.8%), and Home Mortgage Alliance Corporation (12.7%) are the top originators for the mortgage pool. The remaining originators each comprise less than 10.0% of the mortgage loans.

Carrington Mortgage Services, LLC is the Servicer of all 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, Note Registrar, and Certificate Registrar. U.S. Bank National Association will act as the Custodian. U.S. Bank Trust National Association will act as the Delaware Trustee.

On or after the earlier of (1) the Payment Date occurring in March 2028 or (2) the date when the aggregate stated principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Controlling Holder (majority holder of the Class XS Notes; initially expected to be affiliate of the Sponsor) may terminate the Issuer at a price equal to the greater of (A) the class balances of the related Notes plus accrued and unpaid interest, including any cap carryover amounts and (B) the principal balances of the mortgage loans plus accrued and unpaid interest, including fees, expenses, and indemnification amounts. The Controlling Holder must complete a qualified liquidation, which requires (1) a complete liquidation of assets within the Trust and (2) proceeds to be distributed to the appropriate holders of regular or residual interests.

The Controlling Holder will have the option, but not the obligation, to repurchase any mortgage loan (other than loans under forbearance plan as of the Closing Date) that becomes 90 or more days delinquent at the repurchase price (par plus interest), provided that such repurchases in aggregate do not exceed 10% of the total principal balance as of the Cut-Off Date.

Although the majority of 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, 82.3% of the loans are designated as non-QM, 0.1% are designated as QM Rebuttable Presumption, and 8.7% are designated as QM Safe Harbor. Approximately 8.9% of the mortgages are loans that were not subject to the QM/ATR rules as they are made to investors for business purposes.

There will not be any advancing of delinquent principal or interest on any mortgages by the Servicer or any other party to the transaction. In addition, the related servicer is not 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 loan that 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 employs a sequential-pay cash flow structure. Principal proceeds can be used to cover interest shortfalls after the more senior tranches are paid in full (IPIP).

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;
-- No servicer advances of delinquent principal and interest; and
-- Limited third-party diligence valuation review on a portion of the pool.

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

Morningstar DBRS' credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Interest Payment Amount, Interest Carryforward Amount, and the related Class Principal Balance.

Morningstar DBRS' credit ratings on Class A-1, A-2, A-3, and M-1 Notes also address the credit risk associated with the increased rate of interest applicable to the Class A-1, A-2, A-3, and M-1 Notes if the Class A-1, A-2, A-3, and M-1 Notes remain outstanding on the step-up date (April 2029) in accordance with the applicable transaction document(s).

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. For example, in this transaction, Morningstar DBRS' credit ratings do not address the payment of any Cap Carryover Amount based on its position in the cash flow waterfall.

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 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 ratings is the RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (January 2, 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 securities 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 securities 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.
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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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.