Morningstar DBRS Assigns Provisional Credit Ratings to Towd Point Mortgage Trust 2025-CES2

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following Asset-Backed Securities, Series 2025-CES2 (the Notes) to be issued by Towd Point Mortgage Trust 2025-CES2 (TPMT 2025-CES2 or the Trust):

-- $346.5 million Class A1 at (P) AAA (sf)
-- $28.1 million Class A2 at (P) AA (high) (sf)
-- $20.3 million Class M1 at (P) A (sf)
-- $18.5 million Class M2 at (P) BBB (low) (sf)
-- $13.2 million Class B1 at (P) BB (low) (sf)
-- $7.4 million Class B2 at (P) B (low) (sf)
-- $28.1 million Class A2A at (P) AA (high) (sf)
-- $28.1 million Class A2AX at (P) AA (high) (sf)
-- $28.1 million Class A2B at (P) AA (high) (sf)
-- $28.1 million Class A2BX at (P) AA (high) (sf)
-- $28.1 million Class A2C at (P) AA (high) (sf)
-- $28.1 million Class A2CX at (P) AA (high) (sf)
-- $28.1 million Class A2D at (P) AA (high) (sf)
-- $28.1 million Class A2DX at (P) AA (high) (sf)
-- $20.3 million Class M1A at (P) A (sf)
-- $20.3 million Class M1AX at (P) A (sf)
-- $20.3 million Class M1B at (P) A (sf)
-- $20.3 million Class M1BX at (P) A (sf)
-- $20.3 million Class M1C at (P) A (sf)
-- $20.3 million Class M1CX at (P) A (sf)
-- $20.3 million Class M1D at (P) A (sf)
-- $20.3 million Class M1DX at (P) A (sf)
-- $18.5 million Class M2A at (P) BBB (low) (sf)
-- $18.5 million Class M2AX at (P) BBB (low) (sf)
-- $18.5 million Class M2B at (P) BBB (low) (sf)
-- $18.5 million Class M2BX at (P) BBB (low) (sf)
-- $18.5 million Class M2C at (P) BBB (low) (sf)
-- $18.5 million Class M2CX at (P) BBB (low) (sf)
-- $18.5 million Class M2D at (P) BBB (low) (sf)
-- $18.5 million Class M2DX at (P) BBB (low) (sf)

The (P) AAA (sf) credit rating on the Notes reflects 22.30% 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 (low) (sf) credit ratings reflect 16.00%, 11.45%, 7.30%, 4.35%, and 2.70% of credit enhancement, respectively.

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

TPMT 2025-CES2 is a securitization of a portfolio of fixed, prime and near-prime, closed-end second-lien (CES) residential mortgages funded by the issuance of the Asset-Backed Securities, Series 2025-CES2 (the Notes). The Notes are backed by 4,835 mortgage loans with a total principal balance of $445,988,972 as of the Cut-Off Date.

The portfolio, on average, is 3 months seasoned, though seasoning ranges from one to 35 months. Borrowers in the pool represent prime and near-prime credit quality with a weighted-average (WA) Morningstar DBRS-calculated FICO score of 747, a Morningstar DBRS-calculated original combined loan-to-value ratio (CLTV) of 75.4%, and are 100.0% originated with Issuer-defined full documentation. All the loans are current and 98.3% of the mortgage pool has been clean for the last 24 months or since origination.

TPMT 2025-CES2 represents the tenth CES securitization by FirstKey Mortgage, LLC and second by CRM 2 Sponsor, LLC. Spring EQ, LLC (Spring EQ; 67.4%) and Rocket Mortgage, LLC (Rocket; 32.2%) are the main originators for the mortgage pool, with another 0.4% by other originator(s).

Newrez, LLC d/b/a Shellpoint Mortgage Servicing (Shellpoint; 67.8%) and Rocket (32.2%) 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, Administrative Trustee and Administrator. U.S. Bank National Association (rated AA with a Stable trend by Morningstar DBRS) and Computershare Trust Company, N.A. (rated BBB (high) with a Stable trend by Morningstar DBRS) will act as 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-CES2 (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 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, 17.9% of the loans are designated as non-QM, 16.4% are designated as QM Rebuttable Presumption, and 63.9% are designated as QM Safe Harbor. Approximately 1.9% of the mortgages are loans made to investors for business purposes or were originated by a Community Development Financial Institution and were not subject to the QM/ATR rules.

The Servicers (except servicers servicing the Actual Serviced Mortgage Loans) 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. In addition, the related servicer is 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 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 (UPB) 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 M1 and subordinate bonds will not be paid from principal proceeds until the Class A1 and A2 Notes are retired.

The Sponsor will have the option, but not the obligation, to repurchase any mortgage loan that becomes 30 or more days delinquent within 90 days of the Closing Date 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.

On or after (1) the payment date in June 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 Notes 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).

The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary "Baseline Macroeconomic Scenarios for Rated Sovereigns March 2025 Update," published on March 26, 2025. 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;
-- Three-Month Advances of Delinquent P&I; and
-- Limited Third-Party Diligence Valuation Review.

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 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 address the credit risk associated with the increased rate of interest applicable to these Notes if they remain outstanding on the step-up date (July 2029) in accordance with the applicable transaction documents.

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 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 credit 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 (May 16, 2025) https://dbrs.morningstar.com/research/454196.

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.

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.
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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.

-- RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model (Version 1.3.29.1)
https://dbrs.morningstar.com/research/445477
-- 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.