DBRS Morningstar Finalizes Provisional Ratings on Towd Point Mortgage Trust 2023-1RMBS
DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following Asset-Backed Securities, Series 2023-1 (the Notes) issued by Towd Point Mortgage Trust 2023-1 (the Trust):
-- $412.4 million Class A1 at AAA (sf)
-- $44.2 million Class A2 at AAA (sf)
-- $23.8 million Class M1 at A (high) (sf)
-- $17.1 million Class M2 at BBB (high) (sf)
-- $12.2 million Class B1 at BB (high) (sf)
-- $7.7 million Class B2 at B (high) (sf)
-- $412.4 million Class A1A at AAA (sf)
-- $412.4 million Class A1AX at AAA (sf)
-- $412.4 million Class A1B at AAA (sf)
-- $412.4 million Class A1BX at AAA (sf)
-- $44.2 million Class A2A at AAA (sf)
-- $44.2 million Class A2AX at AAA (sf)
-- $44.2 million Class A2B at AAA (sf)
-- $44.2 million Class A2BX at AAA (sf)
-- $44.2 million Class A2C at AAA (sf)
-- $44.2 million Class A2CX at AAA (sf)
-- $23.8 million Class M1A at A (high) (sf)
-- $23.8 million Class M1AX at A (high) (sf)
-- $23.8 million Class M1B at A (high) (sf)
-- $23.8 million Class M1BX at A (high) (sf)
-- $23.8 million Class M1C at A (high) (sf)
-- $23.8 million Class M1CX at A (high) (sf)
-- $17.1 million Class M2A at BBB (high) (sf)
-- $17.1 million Class M2AX at BBB (high) (sf)
-- $17.1 million Class M2B at BBB (high) (sf)
-- $17.1 million Class M2BX at BBB (high) (sf)
-- $17.1 million Class M2C at BBB (high) (sf)
-- $17.1 million Class M2CX at BBB (high) (sf)
Classes A1AX, A1BX, A2AX, A2BX, A2CX, M1AX, M1BX, M1CX, M2AX, M2BX, and M2CX are interest-only notes. The class balances represent notional amounts.
Classes A1A, A1AX, A1B, A1BX, A2A, A2AX, A2B, A2BX, A2C, A2CX, M1A, M1AX, M1B, M1BX, M1C, M1CX, M2A, M2AX, M2B, M2BX, M2C, and M2CX are exchangeable notes. These classes can be exchanged for combinations of exchange notes as specified in the offering documents.
Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction.
The AAA (sf) rating on the Notes reflects 25.40% and 17.40% of credit enhancement provided by subordinated certificates. The A (high) (sf), BBB (high) (sf), BB (high) (sf), and B (high) (sf) ratings reflect 13.10%, 10.00%, 7.80%, and 6.40% of credit enhancement, respectively.
This transaction is a securitization of a portfolio of predominantly seasoned performing and reperforming first-lien mortgages funded by the issuance of the Notes. The Notes are backed by 4,700 mortgage loans with a total principal balance of $552,839,306 as of the Cut-Off Date (December 31, 2022).
The portfolio is approximately 115 months seasoned, 68.4% of which is greater than 24 months seasoned. The portfolio contains 37.7% modified loans, and modifications happened more than two years ago for 75.2% of the modified loans. Within the pool, 1,470 mortgages have non-interest-bearing deferred amounts, equating to approximately 3.9% of the total principal balance. There are no Home Affordable Modification Program and proprietary principal forgiveness amounts included in the deferred amounts.
As of the Cut-Off Date, 95.5% of the pool is current, and 3.9% is 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method. Additionally, 0.6% of the pool is in bankruptcy (all non-coronavirus bankruptcy loans are performing or 30 days delinquent). Approximately 58.4% of the mortgage loans have been zero times 30 days delinquent (0 x 30) for at least the past 24 months under the MBA delinquency method or since origination.
The majority of the pool (53.8%) is exempt from the Consumer Financial Protection Bureau Ability-to-Repay (ATR)/Qualified Mortgage (QM) rules. The loans subject to the ATR rules are designated as Temporary QM Safe Harbor or QM Safe Harbor (26.4%), Non-QM (18.8%), and Rebuttable Presumption (1.0%).
FirstKey Mortgage, LLC (FirstKey) will acquire the loans from various transferring trusts on the Closing Date. The transferring trusts acquired the mortgage loans between July 2014 and December 2022 and are beneficially owned by funds managed by affiliates of Cerberus Capital Management, L.P. (Cerberus). Upon acquiring the loans from the transferring trusts, FirstKey, through a wholly owned subsidiary, Towd Point Asset Funding, LLC (the Depositor), will contribute loans to the Trust. As the Sponsor, FirstKey, through one or more majority-owned affiliates, will acquire and retain a 5% eligible vertical interest in each class of securities to be issued (other than any residual certificates) to satisfy the credit risk retention requirements. These loans were originated and previously serviced by various entities through purchases in the secondary market.
As of the related servicing transfer date (February 1, 2023), 93.0% of the loans will be serviced by Select Portfolio Servicing, Inc. (SPS), and 7.0% of the loans will be serviced by Specialized Loan Servicing LLC (SLS). The SPS aggregate servicing fee rate for each payment date is 0.15% per annum, and the SLS aggregate servicing fee is 0.30% per annum.
There will not be any advancing of delinquent principal or interest on any mortgages by the Servicers or any other party to the transaction; however, the servicers are obligated to make certain advances in respect of homeowner association fees, taxes, and insurance, installment payments on energy improvement liens, and reasonable costs and expenses incurred in the course of servicing and disposing of properties.
FirstKey, as the Asset Manager, has the option to sell certain nonperforming loans or real estate-owned (REO) properties to unaffiliated third parties individually or in bulk sales. Such sales require an asset sale price to at least equal a minimum reserve amount of the product of (1) 70.41% and (2) the current principal amount of the mortgage loans or REO properties as of the sale date.
When the aggregate pool balance of the mortgage loans is reduced to less than 30.0% of the Cut-Off Date balance, the Call Option Holder (TPMT 2023-1 COH, LLC, an affiliate of the Sponsor, the Seller, the Asset Manager, the Depositor, and the Risk Retention Holder) will have the option to cause the Issuer to sell all of its remaining property (other than amounts in the Breach Reserve Account) to one or more third-party purchasers so long as the aggregate proceeds meet a minimum price.
When the aggregate pool balance is reduced to less than 10% of the balance as of the Cut-Off Date, the Call Option Holder may purchase all of the mortgage loans, REO properties, and other properties from the Issuer, as long as the aggregate proceeds meet a minimum price.
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 Class A1 and A2 Notes are retired.
The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2022 Update, published December 21, 2022. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.
The ratings reflect transactional strengths that include the following:
-- LTVs relative to reporting pools,
-- Satisfactory third-party due-diligence review,
-- String servicer,
-- Asset manager oversight,
-- Current loan status, and
The transaction also includes the following challenges:
-- Representations and warranties standard,
-- No servicer advances of delinquent principal and interest; and
-- Assignments and endorsements.
The full description of the strengths, challenges, and mitigating factors is detailed in the related Rating Report.
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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).
All figures are in U.S. dollars unless otherwise noted.
The principal methodology applicable to the ratings is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020; https://www.dbrsmorningstar.com/research/359116).
Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.
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/407678/baseline-macroeconomic-scenarios-for-rated-sovereigns-december-2022-update
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 firstname.lastname@example.org.
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New York, NY 10005 USA
Tel. +1 212 806-3277
The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.
-- Assessing U.S. RMBS Pools Under the Ability-to-Repay Rules (May 4, 2020),
-- Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022),
-- Third-Party Due-Diligence Criteria for U.S. RMBS Transactions (September 11, 2020),
-- Representations and Warranties Criteria for U.S. RMBS Transactions (April 22, 2020),
-- Legal Criteria for U.S. Structured Finance (December 7, 2022),
-- U.S. Residential Mortgage Originator Rankings (August 28, 2020), https://www.dbrsmorningstar.com/research/366186/us-residential-mortgage-originator-rankings
-- Operational Risk Assessment for U.S. RMBS Originators (November 23, 2022),
-- Operational Risk Assessment for U.S. RMBS Servicers (November 23, 2022),
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at email@example.com.
ALL DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.
- Legal Criteria for U.S. Structured Finance / December 7, 2022
- U.S. Residential Mortgage Originator Rankings / August 28, 2020
- Operational Risk Assessment for U.S. RMBS Servicers / November 23, 2022
- Operational Risk Assessment for U.S. RMBS Originators / November 23, 2022
- Assessing U.S. RMBS Pools Under the Ability-to-Repay Rules / May 4, 2020
- Third-Party Due-Diligence Criteria for U.S. RMBS Transactions / September 11, 2020
- Interest Rate Stresses for U.S. Structured Finance Transactions / August 30, 2022
- Representations and Warranties Criteria for U.S. RMBS Transactions / April 22, 2020
- RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology(Archived) / April 1, 2020
- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings / May 17, 2022