DBRS Morningstar Takes Rating Actions on 42 U.S. RMBS Transactions

DBRS, Inc. (DBRS Morningstar) reviewed 496 classes from 42 U.S. residential mortgage-backed securities (RMBS) transactions. Of the 496 classes reviewed, DBRS Morningstar upgraded six ratings and confirmed 490 ratings.

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

The pools backing the reviewed RMBS transactions consist of subprime, Alt-A, scratch-and-dent, option adjustable rate mortgage, second lien, prime, and reperforming collateral.

The ratings assigned to the securities listed below differ from the ratings implied by the quantitative model. DBRS Morningstar considers these differences material deviations; however, in these cases, the ratings on the subject securities may reflect additional seasoning being warranted to substantiate a further upgrade.

-- DSLA Mortgage Loan Trust 2006-AR2, Mortgage Loan Pass-Through Certificates, Series 2006-AR2, Class 1A-1A
-- EquiFirst Loan Securitization Trust 2007-1, Mortgage Pass-Through Certificates, Series 2007-1, Class A-2B
-- EquiFirst Loan Securitization Trust 2007-1, Mortgage Pass-Through Certificates, Series 2007-1, Class A-2C
-- First Franklin Mortgage Loan Trust 2006-FF2, Mortgage Pass-Through Certificates, Series 2006-FF2, Class A1
-- First Franklin Mortgage Loan Trust 2006-FF2, Mortgage Pass-Through Certificates, Series 2006-FF2, Class A5
-- First Franklin Mortgage Loan Trust 2006-FF2, Mortgage Pass-Through Certificates, Series 2006-FF2, Class M1
-- GSR Mortgage Loan Trust 2005-AR5, Mortgage Pass-Through Certificates, Series 2005-AR5, Class 4A1
-- Home Equity Asset Trust 2007-2, Home Equity Pass-Through Certificates, Series 2007-2, Class 1-A-1
-- HarborView Mortgage Loan Trust 2007-A, Mortgage Loan Pass-Through Certificates, Series 2007-A, Class A
-- Impac CMB Grantor Trust 2005-1-1, Collateralized Asset-Backed Grantor Trust Certificates, Series 2005-1, Class M-1
-- Impac CMB Grantor Trust 2005-1-2, Collateralized Asset-Backed Grantor Trust Certificates, Series 2005-1, Class M-2
-- Impac CMB Grantor Trust 2005-1-4, Collateralized Asset-Backed Grantor Trust Certificates, Series 2005-1, Class M-4
-- Impac CMB Grantor Trust 2005-1-5, Collateralized Asset-Backed Grantor Trust Certificates, Series 2005-1, Class M-5
-- Impac CMB Grantor Trust 2005-1-6, Collateralized Asset-Backed Grantor Trust Certificates, Series 2005-1, Class M-6
-- Impac CMB Grantor Trust 2005-1-7, Collateralized Asset-Backed Grantor Trust Certificates, Series 2005-1, Class B
-- OBX 2021-J3 Trust, Mortgage-Backed Notes, Series 2021-J3, Class B-X-2
-- OBX 2021-J3 Trust, Mortgage-Backed Notes, Series 2021-J3, Class B-3
-- OBX 2021-J3 Trust, Mortgage-Backed Notes, Series 2021-J3, Class B-4
-- OBX 2021-J3 Trust, Mortgage-Backed Notes, Series 2021-J3, Class B-5

CORONAVIRUS DISEASE (COVID-19) IMPACT
The 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 RMBS asset classes shortly after the onset of the pandemic.

Such mortgage delinquencies were mostly in the form of forbearance, which is generally short-term payment relief that may perform very differently from traditional delinquency. At the onset of the pandemic, because the option to forbear mortgage payments was so widely available, it drove forbearance to a very high level. When the dust settled, pandemic-induced forbearance in 2020 performed better than expected, thanks to government aid 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.

In connection with the economic stress assumed under its baseline scenario (“Baseline Macroeconomic Scenarios for Rated Sovereigns: September 2022 Update,” published on September 19, 2022), DBRS Morningstar may assume higher loss expectations for pools with loans on forbearance plans.

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

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/, Social/, Governance factors that had a significant or relevant effect on the credit analysis.

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/396929 (May 17, 2022).

Notes:
The principal methodology is U.S. RMBS Surveillance Methodology (February 21, 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.

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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