Morningstar DBRS Finalizes Provisional Credit Ratings on PRMI Securitization Trust 2025-PHL1

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the Mortgage-Backed Notes, Series 2025-PHL1 (the Notes) issued by PRMI Securitization Trust 2025-PHL1 (PRMI 2025-PHL1 or the Trust) as follows:

-- $259.6 million Class A-1 at (P) AAA (sf)
-- $8.6 million Class A-2 at (P) AA (sf)
-- $8.5 million Class A-3 at (P) A (sf)
-- $7.0 million Class M-1 at (P) BBB (sf)
-- $5.5 million Class B-1 at (P) BB (sf)
-- $3.1 million Class B-2 at (P) B (sf)

The AAA (sf) rating on the Class A-1 Notes reflects 12.50% of credit enhancement provided by subordinated certificates. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 9.60%, 6.75%, 4.40%, 2.55%, and 1.50% of credit enhancement, respectively.

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

The Notes are backed by 547 LOC loans with a total unpaid principal balance (UPB) of $296,663,250 and a total current credit limit of $367,998,201 as of the Cut-Off Date (August 31, 2025).

The portfolio, on average, is 36 months seasoned, though seasoning ranges from three to 128 months. 98.6% of the LOC loans have had clean pay history since origination. All of the loans in the pool are first-lien LOCs evidenced by promissory notes secured by mortgages or deeds of trust or other instruments creating first liens on one- to four-family residential properties, planned unit development (PUDs), townhouses and condominiums.

The transaction's Sponsor is PRMI Capital Markets LLC, an affiliate of the PR Mortgage Investment, LP (PRMI or the Fund). PRMI, a leveraged debt fund that specializes in real estate related assets, commenced operations in 2019. The transaction is the fourth securitization of first-lien HELOC loans by the Sponsor. The Fund's general partner is PRMIGP, LLC, and the investment manager is PR Mortgage Investment Management, LLC. B3 LLC, composed of three senior investment executives, holds a majority interest in the Fund's general partner and investment manager, and Merchants Bancorp, the holding company of Merchants Bank of Indiana (MBIN), holds a minority interest in the general partner and investment manager, and is also a limited partner in the Fund. MBIN is a publicly traded bank with approximately $19.1 billion in assets.

In this transaction, all loans originated under the All-In-One program are open-LOCs, with a draw period of 25 or 30 years during which borrowers may make draws up to a credit limit, though such right to make draws may be temporarily frozen in certain circumstances. A 25 or 30-year draw period offers borrower flexibility to draw funds over the life of the loan. However, the total credit line amount (or credit limit) begins to decline (in period 121) after remaining constant for the first 10 years. Thereafter, the credit limit declines every payment period by a monthly amortization amount required to pay off the loan at maturity or 1/240th of the maximum capacity of the credit line (limit reduction amount). As such, even if a borrower redraws the amount to a limit at some point in the future, the limit is lowered to match the amount that could be repaid at maturity using the required monthly payments.

All of the LOC loans in this transaction have 10-year IO terms (IO payment period), so borrowers are required to make IO payments within the IO payment period and both interest and principal payments during and repayment period. No loans require a balloon payment.

Although LOC loans include a 10-year IO term, the borrowers are qualified for income using, among other measures, a debt-to-income ratio (DTI) calculated with a fully indexed interest rate and assuming principal amortization over 360 periods (as if the borrower is required to make principal payments during the IO payment period).

Relative to other types of HELOCs backing Morningstar DBRS-rated deals, the loans in the pool generally have high borrower credit scores, are all in a first-lien position, and do not include balloon payments. The relatively long IO period and income qualification based on the fully amortized payment amount help ensure the borrower has enough cushion to absorb increased payments after the IO term expires. Also, the lack of balloon payment allows borrowers to avoid the payment shock that typically occurs when a balloon payment is required.

The transaction, based on a static pool, employs a sequential-pay cash flow structure subject to a performance trigger (Credit Event) related to cumulative losses or delinquencies exceeding a specified threshold. Principal proceeds can be used to cover interest shortfalls on the most senior notes outstanding (IPIP). Also, the excess spread can be used to cover realized losses first before being allocated to unpaid Cap Carryover Amounts due to Class A-1 down to Class B-3 Notes.

The Trust Certificates have a pro rata principal distribution with the Class A-1 Notes while the Credit Event is not in effect. When the trigger is in effect, the Trust Certificates' principal distribution will be subordinated to both the senior and subordinate notes in the payment waterfall. While a Credit Event is in effect, realized losses will be allocated reverse sequentially starting with the Trust Certificates, followed by the Class B-3 Notes, and then continuing up to Class A-1 Notes based on their respective payment priority. While a Credit Event is not in effect, the losses will be allocated pro rata between the Trust Certificates and all outstanding notes based on their respective priority of payments. The outstanding notes will allocate realized losses reverse sequentially, beginning with Class B-3 up to Class A-1.

For this transaction, other than the Servicer's obligation to fund any monthly Net Draws, described above, neither the Servicer nor any other transaction party will fund any monthly advances of principal and interest (P&I) on any LOC loan. However, the Servicer is obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing of properties (servicing advances) to the extent such advances are deemed recoverable or as directed by the Controlling Holder (the holder or holders of more than a 50% interest of the Class XS Notes; initially, the Depositor's affiliate).

All of the loans in the pool are exempt from the Consumer Financial Protection Bureau Ability-to-Repay (ATR)/Qualified Mortgage (QM) rules because the LOC loans are not subject to the ATR/QM rules.

On or after the earlier of the (i) payment date in October 2027, and (ii) the date on which the aggregate principal balance of the mortgage loans is less than or equal to 30% of the aggregate principal balance as of the cut-off date, the Issuer may, at the direction of the holder of the Trust Certificates, purchase all of the loans and any real estate owned (REO) properties at an optional termination price described in the transaction documents. An Optional Termination will be followed by a qualified liquidation, which requires a complete liquidation of assets within the Trust and the distribution of proceeds to the appropriate holders of regular or residual interests. The Certificateholder may sell, transfer, convey, assign, or otherwise pledge the right to direct the Issuer to exercise the Optional Termination to a third party, in which case the right must be exercised by such third party, as described in the transaction documents.

On any payment date on or after the later of (1) the two-year anniversary of the Closing Date, and (2) the earlier of (a) the three-year anniversary of the Closing Date, and (b) the date on which the aggregate loans' principal balance is less than or equal to 30% of the Cut-Off Date balance, the Issuer may, at the direction of the holder of the Trust Certificates, purchase all of the outstanding Notes and the Trust Certificates at the purchase price in the transaction documents (Optional Redemption). An Optional Redemption will be followed by a qualified liquidation.

The Sponsor, at its option, may purchase any mortgage loan that is 90 days or more delinquent under the Mortgage Bankers Association (MBA) method at the repurchase price (Optional Purchase) described in the transaction documents. The total balance of such loans purchased by the Depositor will not exceed 10% of the Cut-Off balance.

The ratings reflect transactional strengths that include the following:

-- Robust pool composition,
-- Robust recent payment histories,
-- Current loan status, and
-- Satisfactory third-party due-diligence review.

The transaction also includes the following challenges:

-- Holder of the Trust Certificates may fail to reimburse servicer for draws,
-- Representations and warranties standard, and
-- No servicer advances of delinquent P&I.

The full description of the strengths, challenges, and mitigating factors is detailed in the related report.
Morningstar DBRS' credit rating on the Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the applicable Current Interest, Interest Carryforward Amount, and Note Amount.

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. For example in this transaction, DBRS Morningstar's ratings do not address the payment of any Cap Carryover Amounts.

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 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 U.S. 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 (September 03, 2025) https://dbrs.morningstar.com/research/461964.

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

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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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 1.3.29.2)
https://dbrs.morningstar.com/research/461964

-- Interest Rate and Currency Stresses for Global Structured Finance Transactions (September 3, 2025), https://dbrs.morningstar.com/research/461958

-- 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 [email protected].