DBRS Morningstar Confirms Ratings on CHIP Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following outstanding notes (the Notes) issued by CHIP Mortgage Trust (the Trust):

-- Series 2020-1 Medium Term Notes at AAA (sf)
-- Series 2021-1 Medium Term Notes at AAA (sf)

All senior Notes issued by the Trust rank pari passu with each other.

The rating confirmations are based on the following factors:

(1) Credit enhancement is provided by a combination of (A) a minimum cash reserve equal to six months of interest payable on the Notes to mitigate cash flow irregularity, (B) overcollateralization, and (C) subordination (if applicable). The Trust continues to comply with the limit on senior debt issuance of up to 95% of the aggregate outstanding asset balance with a senior debt-to-mortgage ratio and total debt-to-mortgage ratio of 87.5% as at November 2021.

(2) The conservative underwriting standards associated with the origination of the reverse mortgages, including the use of qualified appraisers; the reduction of appraised values based on the region, property quality, property type, and specific location to reflect potential market illiquidity or housing volatility; and the use of conservative actuarial tables in determining the expected occupancy term, resulting in low historical losses. The current mortgage portfolio held directly by the Trust has a weighted-average loan-to-value ratio (weighted by the current loan amount) of 44.9% (as of April 30, 2021), as calculated by DBRS Morningstar.

(3) The extensive experience of HomeEquity Bank in originating and underwriting reverse mortgages along with the level of ongoing review and re-appraisal of the properties. Re-appraisal of properties occurs on a formal basis at least every five years.

(4) The assets are a large, diversified portfolio of reverse mortgages with a first-ranking charge on residential properties across Canada.

DBRS Morningstar monitors the performance of the transaction to identify any deviation from DBRS Morningstar’s expectation at issuance and to ensure that the ratings remain appropriate. The review is predicated on the timely receipt of performance information from the related providers. The performance and characteristics of the reverse mortgage portfolio and the Notes are available and updated each month in the Monthly Canadian ABS 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 Canadian dollars unless otherwise noted.

The principal methodology is the Master Canadian Structured Finance Surveillance Methodology (June 7, 2021), 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.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

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 this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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