Morningstar DBRS Assigns Provisional Credit Ratings to Point Securitization Trust 2025-1

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the Option-Backed Notes to be issued by Point Securitization Trust 2025-1 as follows:

-- $162.2 million Class A-1 Notes at (P) A (low) (sf)
-- $35 million Class A-2 Notes at (P) BBB (low) (sf)
-- $28.3 million Class B-1 Notes at (P) BB (low) (sf)
-- $23.3 million Class B-2 Notes at (P) B (high) (sf)

The A (low) (sf) credit rating reflects a cumulative advance rate of 63% for the Class A-1 Notes, the BBB (low) (sf) credit rating reflects a cumulative advance rate of 76.6% for the Class A-2 Notes, the BB (low) (sf) credit rating reflects a cumulative advance rate of 87.5% for the Class B-1 Notes, and the (B) (high) (sf) credit rating reflects a cumulative advance rate of 96.5% for the Class B-2 Notes.

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

Home equity investments (HEIs) allow homeowners access to the equity in their homes without having to sell their homes or make monthly mortgage payments. HEIs provide homeowners with an alternative to borrowing and are available to homeowners of any age (unlike reverse mortgage loans, for example, for which there is often a minimum age requirement). A homeowner receives an upfront cash payment (an Advance or an Investment Amount) in exchange for giving an investor (i.e., the Originator) a stake in their property. The homeowner retains sole right of occupancy of the property and pays all upkeep and expenses during the term of the HEI, but the Originator earns an investment return based on the future value of the property, typically subject to a returns cap.

Like reverse mortgage loans, the HEI underwriting approach is asset based, meaning there is greater emphasis placed on the value of the underlying property and the amount of home equity, than on the credit quality of the homeowner. The property value is the main focus for predicting investment return because it is the primary source of funds to satisfy the obligation. HEIs are nonrecourse; in a default situation, a homeowner is not required to provide additional funds when the HEI settlement amount exceeds the remaining equity value in the property (after accounting for any other obligations such as senior liens, if applicable). Recovery of the Advance and any Originator return is primarily subject to the amount of appreciation/depreciation on the property, the amount of debt that may be senior to the HEI, and the cap on investor return.

As of the cut-off date, 263 contracts in the transaction are first-lien contracts, representing roughly $29.11 million in current intrinsic value; 1,750 are second-lien contracts, representing roughly $210.05 million in current intrinsic value; and 128 are third-lien contracts, representing roughly $18.42 million in current intrinsic value.

Of the pool, 11.37% of the contracts are first lien, and have a weighted-average (WA) HEI percentage of 59.43%; 81.64% are second-lien contracts and have a WA HEI percentage of 55.54%; and the remaining 6.99% of the pool are third-lien contracts, with a WA HEI percentage of 54.58%. This brings the entire transaction's WA HEI percentage to 55.91%. To better understand the contract math, please see the example in the Contract Mechanics--Worked Example section of the associated presale report. The current unadjusted loan-to-value ratio of the pool is 34.94% (i.e., the percentage of senior liens ahead of the contracts). At cut-off, the pool had a WA HEI thickness of 15.89 %, and a current WA Combined Loan-to-Value of 50.40%.

The transaction uses a sequential structure. For cash distributions that are paid prior to the occurrence of a Credit Event, payments are first made to the Interest Amounts and any Interest Carryover on the Class A-1, Class A-2, Class B-1 (prior to the occurrence of a Class B-1 PIK Date), and Class B-2 (prior to the occurrence of a Class B-2 PIK Date) Notes. Payments are then made to the Note Amount of Class A-1 until such notes are paid off. With respect to Class A-2, B-1, and B-2 Notes, payments are made to the Note Amount until Note Amount of the Class A-2, Class B-1, and Class B-2 Notes are paid off with an amount up to the amount of Net Sale Proceeds (if any) that was included in the total Available Funds on such Payment Date in sequential order. If a Class B-1 PIK Date or Class B-2 PIK Date occurs, then payments of interest will instead be redirected first to the Advance Facility Provider, followed by principal to the Class A-1 Notes until reduced to zero.

For cash distributions that are paid post the occurrence of a Credit Event, payments are first made to the Interest Amounts and any Interest Carryover on Class A-1 Notes. In the event that the Class A-1 Notes have not been redeemed or paid in full, on or after the Expected Redemption Date, the A-2 Notes Accrual Amount would be paid first to Class A-1 Notes until its paid off and then to Additional Accrued Amounts to Class A-1 Notes, until such amounts have been reduced to zero. If the Class A-1 Notes have been redeemed or paid in full prior to the Redemption Date, payments are made to the Interest Amounts and any unpaid Interest Carryover on Class A-2 Notes. The Class B-1 and B-2 Notes are accrual notes and will not be entitled to any payments of principal until the Class A-1 and A-2 Notes are paid down along with their respective Additional Accrued Amounts that have accrued but were previously unpaid.

With respect to Class A-1 Notes, payments are first made to the Note Amount until such amounts are reduced to zero and then to the Additional Accrued Amounts, including any unpaid Additional Accrued Amounts, until such amounts are reduced to zero on Class A-1 Notes. The Class A-2 Notes are then paid their respective Note Amount until it's paid off, and the Additional Accrued Amounts, including any unpaid Additional Accrued Amounts, until it's reduced to zero. The Class B-1 Notes are then paid their respective Note Amount until it's paid off, and the Additional Accrued Amounts, including any unpaid Additional Accrued Amounts, until reduced to zero. Lastly, the B-2 Notes are then paid their respective Note Amount until it's paid off, and the Additional Accrued Amounts, including any unpaid Additional Accrued Amounts, until reduced to zero.

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 for each of the rated Notes are the related Note Amount, Interest Amount, and Interest Carryover.

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.

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, 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 Rating and Monitoring U.S. Reverse Mortgage Securitizations (Appendix 3--Home Equity Investments Methodology; September 30, 2024) https://dbrs.morningstar.com/research/440088

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 these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

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.

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 (March 27, 2025),
https://dbrs.morningstar.com/research/450750
-- 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
-- Third-Party Due-Diligence and Representations & Warranties Criteria for U.S. RMBS Transactions (September 30, 2024), https://dbrs.morningstar.com/research/440091

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