DBRS, Inc. (DBRS) finalized the following provisional ratings on the Mortgage-Backed Securities, Series 2018-RPL1 (the Notes) issued by GS Mortgage-Backed Securities Trust 2018-RPL1 (the Trust):
-- $500.2 million Class A1A1 at AAA (sf)
-- $55.6 million Class A1A2 at AAA (sf)
-- $500.8 million Class A1A at AAA (sf)
-- $61.8 million Class A1B at AAA (sf)
-- $617.5 million Class A1 at AAA (sf)
-- $25.9 million Class A2 at AAA (sf)
-- $55.8 million Class A3 at AA (sf)
-- $48.2 million Class M1 at A (sf)
-- $36.0 million Class M2 at BBB (sf)
-- $35.1 million Class B1 at BB (sf)
-- $27.0 million Class B2 at B (sf)
Classes A1A and A1 are exchangeable notes. These classes can be exchanged for combinations of exchange notes as specified in the offering documents.
Classes A1A1, A1A2 and A1A are super-senior notes. These classes benefit from additional protection from the senior support note (Class A1B) with respect to loss allocation.
The AAA (sf) ratings on the notes reflect the 28.55% of credit enhancement provided by subordinated notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect credit enhancement of 22.35%, 17.00%, 13.00%, 9.10% and 6.10%, respectively.
Other than the specified classes above, DBRS does not rate any other classes in this transaction.
After DBRS assigned provisional ratings to GSMBS 2018-RPL1, the collateral pool was significantly reduced by 4,075 loans, reflecting a 50% decrease in principal balance. Although this was a substantial change, the portfolio was relatively comparable to the previous pool, with slight deterioration in certain credit characteristics. In addition, certain fees (including the Indenture Trustee fee and the annual cap for extraordinary trust expenses) have changed, causing the fees to increase disproportionately to the reduction in the collateral pool. DBRS incorporated such changes in its cash flow analysis.
This transaction is a securitization of a portfolio of seasoned performing and re-performing first-lien residential mortgages. The Notes are backed by 4,063 loans with a total principal balance of $947,870,115 as of the Cut-Off Date (October 31, 2018).
The portfolio is approximately 138 months seasoned, and 99.3% of the loans are modified. The modifications happened more than two years from the Cut-Off Date for 93.4% of the modified loans. Within the pool, 85.1% are mortgages that have non-interest-bearing deferred amounts, which equate to 19.8% of the total principal balance.
The majority of the loans in the pool (97.3%) are current as of the Cut-Off Date. Approximately 1.5% of the pool is 30 days delinquent, 0.1% is 60 days delinquent, less than 0.1% is 90 days delinquent and 1.1% are bankruptcy loans, which are either performing or 30 days to 90 days delinquent. Approximately 87.7% of the mortgage loans have been zero times 30 days delinquent (0 x 30) for at least the past 24 months under the Mortgage Bankers Association delinquency method. All but four of the loans are not subject to the Consumer Financial Protection Bureau Ability-to-Repay/Qualified Mortgage rules.
The Mortgage Loan Sellers, Goldman Sachs Mortgage Company (GSMC; 99.8% of the loans) and MTGLQ Investors, L.P. (0.2% of the loans), acquired the loans in a whole-loan purchase from a third-party mortgage loan seller prior to the Closing Date and, through an affiliate, GS Mortgage Securities Corp. (the Depositor), will contribute the loans to the Trust. As the Sponsor, GSMC, or a majority-owned affiliate, will retain an eligible vertical interest in the transaction consisting of an uncertificated interest (the Retained Interest) in the Issuer representing the right to receive at least 5.0% of the amounts collected on the mortgage loans, net of fees, expenses and reimbursements of the Issuer and paid on the Notes (other than the Class R Notes) and the Retained Interest to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder. These loans were originated and previously serviced by various entities through purchases in the secondary market.
The loans will be serviced by Select Portfolio Servicing, Inc. (SPS). The servicing fee for the GSMBS 2018-RPL1 portfolio will be 0.08% per annum, significantly lower than transactions backed by similar collateral. DBRS stressed such servicing expenses in its cash flow analysis to account for a potential fee increase in a distressed scenario.
There will not be any advancing of delinquent principal or interest on any mortgages by the Servicer or any other party to the transaction; however, the Servicer is obligated to make advances with respect to the preservation, inspection, restoration, protection and repair of a mortgaged property, including delinquent tax and insurance payments, the enforcement or judicial proceedings associated with a mortgage loan and the management and liquidation of properties (to the extent such advances are deemed recoverable by the Servicer).
As a loss mitigation alternative, the Servicer may sell mortgage loans that are in early stage or advanced default to maximize proceeds on such defaulted loan on a net present value basis.
The transaction employs 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 more subordinate bonds will not be paid from principal proceeds until the more senior classes are retired.
The representations and warranties (R&W) framework is comparable with other DBRS-rated seasoned re-performing transactions with some variances with respect to the Breach Reserve Account. The remedy obligations of a Mortgage Loan Seller with regard to material breaches of R&W will expire 13 months from the Closing Date. After which, a Breach Reserve Account will be available to satisfy losses related to potential R&W breaches. It is beneficial that such reserve account will be fully funded (as opposed to partially funded in certain other transactions) upfront at the initial target amount of $3,559,412.50 by the Sponsor. However, in the future, if there is a need to build the account back to target, the additional amounts will be funded using monthly excess cash flow at the bottom of the payment waterfall. This funding mechanism is weaker than certain other securitizations where the account is funded using excess servicing at the top of the waterfall. Furthermore, the cash flow structure of GSMBS 2018-RPL1 allows very little, if any, excess cash flow to accrue to target due to the lack of spread between the collateral Net Weighted-Average (WA) Coupon (Net WAC) and bond coupons.
The ratings reflect transactional strengths that include underlying assets that had relatively clean performance in the recent past, a strong servicer and better credit quality as compared with other distressed and re-performing pools. Additionally, a satisfactory third-party due diligence review was performed on the entire portfolio with respect to regulatory compliance, payment history, data integrity, servicing comments and title and tax review. Updated broker price opinions were provided for all the loans; however, a reconciliation was not performed on the updated values.
The DBRS ratings of AAA (sf) and AA (sf) address the timely payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the related Notes. The DBRS ratings of A (sf), BBB (sf), BB (sf) and B (sf) address the ultimate payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the related Notes.
The full description of the strengths, challenges and mitigating factors is detailed in the related report.
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, which can be found on dbrs.com under Methodologies.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.
The full report providing additional analytical detail is available by clicking on the link under Related Documents or by contacting us at email@example.com.