Morningstar DBRS Assigns Provisional Credit Ratings to PRPM 2025-RPL3, LLC

DBRS, Inc. (Morningstar DBRS) assigned the following provisional credit ratings to the Mortgage-Backed Notes, Series 2025-RPL3 (the Notes) to be issued by PRPM 2025-RPL3, LLC (PRPM 2025-RPL3 or the Trust):

-- $253.0 million Class A-1 at (P) AAA (sf)
-- $26.5 million Class A-2 at (P) AA (low) (sf)
-- $17.1 million Class A-3 at (P) A (low) (sf)
-- $13.0 million Class M-1 at (P) BBB (low) (sf)
-- $8.5 million Class M-2 at (P) BB (sf)

The (P) AAA (sf) credit rating on the Class A-1 Notes reflects 28.90% of credit enhancement provided by the subordinated notes. The (P) AA (low) (sf), (P) A (low) (sf), (P) BBB (low) (sf), and (P) BB (sf) credit ratings reflect 21.45%, 16.65%, 13.00%, and 10.60% 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 (one loan is second-lien) residential mortgages, to be funded by the issuance of the Notes. The Notes are backed by 1,784 loans with a total principal balance of $355,814,808 as of the Cut-Off Date (February 28, 2025).

The mortgage loans are approximately 95 months seasoned. As of the Cut-Off Date, 76.4% of the loans are current under the Mortgage Bankers Association delinquency method, including 17 (1.1% of the loans) bankruptcy-performing loans. The current delinquency status distribution for this pool is as follows.

The number of months clean (consecutively zero times 30 days delinquent) at issuance is stronger relative to other Morningstar DBRS-rated seasoned transactions, over the past 12 months, 67.4% of the mortgage loans have made 12 or more payments.

Modified loans make up 24.0% of the portfolio. The modifications happened more than two years ago for 92.5% of the modified loans. Within the pool, 181 mortgages (10.1% of the pool by loan count) have a total noninterest-bearing deferred amount of $2,744,804, which equates to approximately 0.8% 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 (89.3%) and Nationstar Mortgage LLC d/b/a Rushmore Servicing (10.7%) 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 April 2026.

Additionally, a failure to redeem the Notes in full by the Payment Date in April 2029 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 April 2028, 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 May 2029 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.

MARYLAND CONSUMER PURPOSE
In 2024, the Maryland Appellate Court ruled that a statutory trust that held a defaulted home equity line of credit (HELOC) must be licensed as both an installment lender and a mortgage lender under Maryland law prior to proceeding to foreclosure on the HELOC. On January 10, 2025, the Maryland Office of Financial Regulation (OFR) issued emergency regulations that apply the decision to all secondary market assignees of Maryland consumer-purpose mortgage loans, and specifically require passive trusts that acquire or take assignment of Maryland mortgage loans that are serviced by others to be licensed. While the emergency regulations became effective immediately, OFR indicated that enforcement would be suspended until April 10, 2025. The emergency regulations will expire on June 16, 2025, and the OFR has submitted the same provisions as the proposed, permanent regulations for public comment. Failure of the Issuer to obtain the appropriate Maryland licenses may result in the Maryland OFR taking administrative action against the Issuer and/or other transaction parties, including assessing civil monetary penalties and issuing a cease and desist order. Further, there may be delays in payments on, or losses in respect of, the Notes if the Issuer or Servicer cannot enforce the terms of a mortgage loan or proceed to foreclosure in connection with a mortgage loan secured by a mortgaged property located in Maryland, or if the Issuer is required to pay civil penalties.

Approximately 2.7% of the pool (40 loans) are Maryland consumer-purpose mortgage loans.

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 P&I;
-- 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 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 Interest Payment Amount, Cap Carryover Amount, and Note Amount.

Morningstar DBRS' credit ratings on the Notes also address 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 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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website (https://dbrs.morningstar.com/understanding-ratings).

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.
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 (March 27, 2025),
https://dbrs.morningstar.com/research/450750
-- 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.