DBRS Morningstar Takes Rating Actions on 25 U.S. RMBS Transactions

DBRS, Inc. (DBRS Morningstar) reviewed 315 classes from 25 U.S. residential mortgage-backed security (RMBS) transactions. Of the 315 classes reviewed, DBRS Morningstar confirmed 294 ratings and upgraded 21 ratings.

The rating confirmations reflect asset performance and credit-support levels that are consistent with the current ratings. The rating upgrades reflect positive performance trends and increases in credit support sufficient to withstand stresses at their new rating levels.

DBRS Morningstar’s rating actions are based on the following analytical considerations:

-- Key performance measures as reflected in month-over-month changes in delinquency (including forbearance) percentages, credit enhancement (CE) increases since deal inception, and CE levels relative to 30-day+ delinquencies.

-- Offset of mortgage-relief initiatives via direct-to-consumer economic aid, mortgage payment assistance, and foreclosure suspension directives.

-- Elevated economic concerns and more conservative home-price assumptions.

As a result of the Coronavirus Disease (COVID-19) pandemic, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers’ ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans.

In connection with the economic stress assumed under its moderate scenario (see the “Global Macroeconomic Scenarios: March 2021 Update,” published on March 17, 2021), DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario.

The pools backing the reviewed RMBS transactions consist of Prime, Alt-A, Option-ARM, Scratch and Dent, Second-Lien, Subprime, and Reperforming collateral.

The ratings assigned to the securities listed below differ from the ratings implied by the quantitative model. DBRS Morningstar considers this difference to be a material deviation; however, in this case, the ratings on the subject securities may either reflect additional seasoning being warranted to substantiate a further upgrade or small loan count. Generally for RMBS transactions, the reporting of recent forbearance-related delinquencies (as opposed to nonforbearance-related delinquencies) in remittance reports has not been consistent and standardized. DBRS Morningstar believes that recent increases in delinquencies mostly reflect forbearances being requested and granted as a result of the coronavirus pandemic. Additionally, DBRS Morningstar believes that forbearance-related delinquencies, especially during the coronavirus pandemic, should have a lower probability of default than nonforbearance-related delinquencies. Because of the lack of standardized reporting, DBRS Morningstar may not be able to appropriately identify delinquencies as a result of forbearance in its loss analysis; therefore, for certain transactions, DBRS Morningstar may have projected significantly higher expected losses using its quantitative model. After reviewing transaction-level performance trends and other analytical considerations outlined in this press release, however, DBRS Morningstar may assign ratings that differ from those implied by the quantitative model, thus resulting in a material deviation.

-- Aegis Asset Backed Securities Trust 2005-2, Mortgage-Backed Notes, Series 2005-2, Class M3
-- Accredited Mortgage Loan Trust 2006-1, Asset-Backed Notes, Series 2006-1, Classes A-4 and M-1
-- ACE Securities Corp. Home Equity Loan Trust, Series 2005-RM1, Asset-Backed Pass-Through Certificates, Series 2005-RM1, Classes M-3 and M-4
-- Citigroup Mortgage Loan Trust Inc., Series 2005-WF2, Asset-Backed Pass-Through Certificates, Series 2005-WF2, Classes MV-3, MV-4, and MV-5
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-FM1, Asset-Backed Certificates, Series 2006-FM1, Classes I-A, II-A-3, and II-A-4
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-HE2, Home Equity Loan Trust Asset-Backed Certificates, Series 2006-HE2, Classes A-4 and M-1
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC1, Mortgage Pass-Through Certificates, Series 2007-BC1, Classes A1, A4, A5, and A6
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC4, Mortgage Pass-Through Certificates, Series 2007-BC4, Classes A1, A2, A4, M1, and M2
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-WF2, Mortgage Pass-Through Certificates, Series 2007-WF2, Classes A1, A3, and A4
-- SG Mortgage Securities Trust 2006-OPT2, Asset-Backed Certificates, Series 2006-OPT2, Classes A-1, A-2, and A-3B
-- Sequoia Mortgage Trust 2005-3, Mortgage Pass-Through Certificates, Series 2005-3, Classes X-A and X-B

The rating actions are the result of DBRS Morningstar’s application of its “U.S. RMBS Surveillance Methodology” published on February 21, 2020.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
The principal methodologies are the U.S. RMBS Surveillance Methodology (February 21, 2020) and RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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