Morningstar DBRS Assigns Credit Ratings to Point Securitization Trust 2021-1

DBRS, Inc. (Morningstar DBRS) assigned credit ratings to the following Option-Backed Notes issued by Point Securitization Trust 2021-1:

-- $50.6 million Class A-1 Notes at AA (sf)
-- $25.8 million Class A-2 Notes at BBB (high) (sf)

The AA (sf) credit rating reflects a cumulative advance rate of 30.6% for the Class A-1 Notes while the BBB (high) (sf) credit rating reflects a cumulative advance rate of 46.0% for the Class A-2 Notes (together with the Class A-1 Notes, the Notes).

Other than the classes specified 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 at 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 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 returns 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 returns.

As of the May 31, 2025, cut-off date, the collateral consisted of approximately $170.58 million in current intrinsic value from 756 nonrecourse HEI agreements secured by first, second, or third liens on single-family, multifamily (two- to four-family), condominium, and townhouse properties. All the contracts in the asset pool were originated between 2015 and 2021.

As of the cut-off date, 74 contracts in the transaction were first-lien contracts, representing roughly $17.05 million in current intrinsic value; 638 were second-lien contracts, representing roughly $144.13 million in current intrinsic value; and 44 were third-lien contracts, representing roughly $9.40 million in current intrinsic value.

Of the pool, 9.99% of the contracts are first lien and have a weighted-average (WA) HEI percentage of 51.00%; 84.44% are second-lien contracts and have a WA HEI percentage of 44.63%; and the remaining 5.41% 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 46.94%. The current unadjusted loan-to-value ratio (LTV) of the pool is 34.94% (i.e., of senior liens ahead of the contracts). At cut-off, the pool had a WA HEI thickness of 15.47%, and a current WA combined LTV of 55.08%.

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 and Class A-2 Notes. Payments are then made to the note amount of Class A-1 until such notes are paid off. With respect to the Class A-2 Notes, payments are then made to the note amount until the note amount of Class A-2 is 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.

With respect to the 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 the Class A-1 Notes. The Class A-2 Notes are then paid their respective note amount until it is paid off and the additional accrued amounts, including any unpaid additional accrued amounts, until it is 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 rating does 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.

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

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 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

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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.