DBRS Morningstar Finalizes Provisional Ratings on MFA 2021-AEINV2 Trust

DBRS, Inc. (DBRS Morningstar) finalized the following provisional ratings on the Mortgage Pass-Through Certificates, Series 2021-AEINV2 (the Certificates) issued by MFA 2021-AEINV2 Trust (MFA 2021-AEINV2):

-- $307.9 million Class A-1 at AAA (sf)
-- $288.4 million Class A-2 at AAA (sf)
-- $216.3 million Class A-3 at AAA (sf)
-- $216.3 million Class A-3-A at AAA (sf)
-- $216.3 million Class A-3-X at AAA (sf)
-- $162.2 million Class A-4 at AAA (sf)
-- $162.2 million Class A-4-A at AAA (sf)
-- $162.2 million Class A-4-X at AAA (sf)
-- $54.1 million Class A-5 at AAA (sf)
-- $54.1 million Class A-5-A at AAA (sf)
-- $54.1 million Class A-5-X at AAA (sf)
-- $129.8 million Class A-6 at AAA (sf)
-- $129.8 million Class A-6-A at AAA (sf)
-- $129.8 million Class A-6-X at AAA (sf)
-- $86.5 million Class A-7 at AAA (sf)
-- $86.5 million Class A-7-A at AAA (sf)
-- $86.5 million Class A-7-X at AAA (sf)
-- $32.4 million Class A-8 at AAA (sf)
-- $32.4 million Class A-8-A at AAA (sf)
-- $32.4 million Class A-8-X at AAA (sf)
-- $10.8 million Class A-9 at AAA (sf)
-- $10.8 million Class A-9-A at AAA (sf)
-- $10.8 million Class A-9-X at AAA (sf)
-- $43.3 million Class A-10 at AAA (sf)
-- $43.3 million Class A-10-A at AAA (sf)
-- $43.3 million Class A-10-X at AAA (sf)
-- $72.1 million Class A-11 at AAA (sf)
-- $72.1 million Class A-11-A at AAA (sf)
-- $72.1 million Class A-11-AI at AAA (sf)
-- $72.1 million Class A-11-B at AAA (sf)
-- $72.1 million Class A-11-BI at AAA (sf)
-- $72.1 million Class A-11-X at AAA (sf)
-- $72.1 million Class A-12 at AAA (sf)
-- $72.1 million Class A-13 at AAA (sf)
-- $19.5 million Class A-14 at AAA (sf)
-- $19.5 million Class A-15 at AAA (sf)
-- $230.9 million Class A-16 at AAA (sf)
-- $77.0 million Class A-17 at AAA (sf)
-- $307.9 million Class A-X-1 at AAA (sf)
-- $307.9 million Class A-X-2 at AAA (sf)
-- $72.1 million Class A-X-3 at AAA (sf)
-- $19.5 million Class A-X-4 at AAA (sf)
-- $9.5 million Class B-1 at AA (low) (sf)
-- $7.1 million Class B-2 at A (low) (sf)
-- $5.4 million Class B-3 at BBB (low) (sf)
-- $3.1 million Class B-4 at BB (sf)
-- $2.2 million Class B-5 at B (sf)

Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-X, A-8-X, A-9-X, A-10-X, A-11-X, A-11-AI, A-11-BI, A-X-1 A-X-2, A-X-3, and A-X-4 are interest-only (IO) certificates. The class balances represent notional amounts.

Classes A-1, A-2, A-3, A-3-A, A-3-X, A-4, A-4-A, A-4-X, A-5, A-5-A, A-5-X, A-6, A-7, A-7-A, A-7-X, A-8, A-9, A-10, A-11-A, A-11-AI, A-11-B, A-11-BI, A-12, A-13, A-14, A-16, A-17, A-X-2, and A-X-3 are exchangeable certificates. These classes can be exchanged for combinations of exchange certificates.

Classes A-2, A-3, A-3-A, A-4, A-4-A, A-5, A-5-A, A-6, A-6-A, A-7, A-7-A, A-8, A-8-A, A-9, A-9-A, A-10, A-10-A, A-11, A-11-A, A-11-B, A-12, and A-13 are super-senior certificates. These classes benefit from additional protection from the senior support certificates (Classes A-14 and A-15) with respect to loss allocation.

The AAA (sf) ratings on the Certificates reflect 9.35% of credit enhancement provided by subordinated certificates. The AA (low) (sf), A (low) (sf), BBB (low) (sf), BB (sf), and B (sf) ratings reflect 6.55%, 4.45%, 2.85%, 1.95%, and 1.30% of credit enhancement, respectively.

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

This is a securitization of a portfolio of first-lien, fixed-rate prime conventional investment-property residential mortgages funded by the issuance of the Mortgage Pass-Through Certificates, Series 2021-AEINV2 (the Certificates). The Certificates are backed by 972 loans with a total principal balance of approximately $339,655,385 as of the Cut-Off Date (December 1, 2021).

loanDepot.com, LLC (loanDepot) is the Originator and the Servicer of the mortgage loans. MFA Financial, Inc. is the Sponsor of the transaction. MFRA NQM Depositor, LLC will act as the Depositor of the transaction. DBRS Morningstar performed a review of loanDepot’s origination and servicing platform and believes the company is an acceptable mortgage loan originator and servicer.

MFA 2021-AEINV2 is the second securitization by the Sponsor composed of fully-amortizing, fixed-rate mortgages on non-owner-occupied residential investment properties. The portfolio consists of conforming mortgages with original terms to maturity of primarily 30 years, which were underwritten by loanDepot using an automated underwriting system (AUS) designated by Fannie Mae or Freddie Mac and were eligible for purchase by such agencies. Details on the underwriting of conforming loans can be found in the Key Probability of Default Drivers section of the related Report. The pool is, on average, five months seasoned with a maximum age of eight months.

Cenlar FSB (Cenlar) will act as the Subservicer. Computershare Trust Company, N.A. (Computershare Trust Company) will act as the Master Servicer, Securities Administrator, Certificate Registrar and Custodian. Wilmington Savings Fund Society, FSB will serve as the Trustee.

For this transaction, the servicing fee is composed of three separate components: the aggregate base servicing fee, the aggregate delinquent servicing fee, and the aggregate additional servicing fee. These fees vary based on the delinquency status of the related loan and will be paid from interest collections before distribution to the securities.

For this transaction, the Servicer will fund advances of delinquent principal and interest (P&I) until deemed unrecoverable. Additionally, the Servicer is obligated to make advances with respect to taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing of properties (servicing advances). If the Servicer fails in its obligation to make P&I advances, Computershare, as a Master Servicer, will be obligated to fund such P&I advances. The Master Servicer is responsible for only P&I advances; the Servicer is responsible for P&I and servicing advances.

The Sponsor, directly or indirectly through a majority-owned affiliate, will retain an eligible vertical interest consisting of at least 5% of the Certificate Principal Amount or Class Notional Amount, as applicable, of each class of Certificates (other than the Class R Certificates) issued on the Closing Date to satisfy the credit risk-retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder.

On any date following the date on which the aggregate loan balance is less than 10% of the Cut-Off Date balance, the Depositor will have the option to terminate the transaction by purchasing all of the mortgage loans and any real estate-owned (REO) property from the issuer at the clean-up call price described in the transaction documents (Clean-up Call). Similarly, on any date following the date on which the loan balance is less than 5% of the Cut-Off Date balance, the Servicer will have the option to terminate the transaction by the Clean-up Call. However, once the Servicer notifies the Depositor of its intent, the Depositor will have 30 days to exercise the Clean-up Call.

The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

Coronavirus Pandemic Impact
The Coronavirus Disease (COVID-19) pandemic and the resulting isolation measures caused an immediate economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar saw increases in delinquencies for many residential mortgage-backed securities (RMBS) asset classes shortly after the onset of the pandemic.

Such mortgage delinquencies were mostly in the form of forbearances, which are generally short-term payment reliefs that may perform very differently from traditional delinquencies. At the onset of the pandemic, the option to forbear mortgage payments was so widely available that it drove forbearances to a very high level. When the dust settled, coronavirus-induced forbearances in 2020 performed better than expected, thanks to government aid, low loan-to-value ratios (LTV), and good underwriting in the mortgage market in general. Across nearly all RMBS asset classes, delinquencies have been gradually trending down in recent months as the forbearance period comes to an end for many borrowers.

For more information regarding the economic stress assumed under its baseline scenario, please see the following DBRS Morningstar commentary: “Baseline Macroeconomic Scenarios For Rated Sovereigns,” December 2021 Update, dated December 9, 2021.

The ratings reflect transactional strengths that include high-quality credit attributes, well-qualified borrowers, structural enhancements, satisfactory third-party due-diligence review, and 100% current loans.

The ratings reflect transactional weaknesses that include loans that are 100% investor properties and certain borrowers with multiple mortgages in the securitized pool, certain aspects of the representations and warranties framework, and the servicing administrator’s financial capabilities.

The full description of the strengths, challenges, and mitigating factors is detailed in the related Report.

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:
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 (April 1, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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 below or by contacting us at info@dbrsmorningstar.com.

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

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