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DBRS Provisionally Rates CHNGE Mortgage Trust 2023-1

David Krechevsky
Feb 23, 2023

Loans in the $227M pool were all originated by Change, a Community Development Financial Institution.

DBRS Inc. (DBRS Morningstar) said recently it has assigned provisional ratings to mortgage pass-through certificates to be issued by CHNGE Mortgage Trust 2023-1.

CHNGE 2023-1 represents the sixth securitization issued by Change Lending LLC, consisting entirely of loans from their Community Mortgage and EZ-Prime programs. 

All the loans in the pool were originated by Change, which is certified by the Treasury Department as a Community Development Financial Institution (CDFI). As a CDFI, Change is required to lend at least 60% of its production to certain target markets, which include low-income borrowers or other underserved communities.

The provisional ratings for Series 2023-1 are as follows:

  • $175.0 million Class A-1 at A (sf)
  • $13.4 million Class M-1 at BBB (sf)
  • $11.7 million Class B-1 at BB (sf), and
  • $12.3 million Class B-2 at B (sf)

Other than the specified classes above, DBRS Morningstar said it did not rate any other classes in this transaction, the company said.

The A (sf) rating on the Class A-1 certificates reflects 22.9% of credit enhancement provided by subordinated certificates, it said, adding that the BBB (sf), BB (sf), and B (sf) ratings reflect 17%, 11.85%, and 6.45% of credit enhancement, respectively.

This is a securitization of a portfolio of fixed- and adjustable-rate expanded prime first-lien residential mortgages funded by the issuance of the certificates. The certificates are backed by 419 mortgage loans with a total principal balance of $227.02 million as of Feb. 1, 2023.

While loans originated by a CDFI are not required to comply with the Consumer Financial Protection Bureau’s (CFPB) Qualified Mortgage (QM) and Ability-to-Repay (ATR) rules, the mortgages included in this pool were made to generally creditworthy borrowers with near-prime credit scores, low loan-to-value ratios (LTVs), and robust reserves.

The loans in the pool were underwritten through Change's Community Mortgage (99.1%) and E-Z Prime (0.9%) programs, both of which are considered weaker than other origination programs because income documentation verification is not required. Generally, underwriting practices of these programs focus on borrower credit, borrower equity contribution, housing payment history, and liquid reserves relative to monthly mortgage payments. 

Change is the servicer for the transaction. NewRez LLC, doing business as Shellpoint Mortgage Servicing (91.6 %) and LoanCare LLC (8.4 %) are the subservicers. 

You can read the full report here.

Feb 23, 2023
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