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Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to seven classes of mortgage pass-through certificates from GCAT 2021-NQM5 Trust (GCAT 2021-NQM5), a $348.3 million non-prime RMBS transaction.
The preliminary ratings assigned by KBRA are as follows:
- A-1: AAA
- A-2: AA+
- A-3: A+
- M-1: BBB+
- B-1: BB+
- B-2: B+
- B-3: Not rated
The underlying collateral, comprised of 610 residential mortgages, includes a notable concentration of alternative-income documentation, with 86.6% of the loans underwritten to <12-month, 12-month or 24-month Bank Statements (43.5%), DSCR Investor (14.4%) and Investor No Ratio (1.0%), CPA Letters with P&L Statements (15.8%), Asset Utilization (5.4%), Rental Income (0.1%), and WVOEs (6.6%).
Approximately 51.4% of the loans were categorized as non-qualified mortgages (non-QM). The remaining loans were categorized as exempt from the ATR/QM rule, having been originated for a business purpose or through a community development financial institution (CDFI). The GCAT 2021-NQM5 transaction is notable as it is the second KBRA-rated RMBS transaction to include a portion of the loan portfolio (19%) for which the third-party due diligence review will not be completed until up to 89 days after closing.
KBRA’s rating approach incorporated loan-level analysis of the mortgage pool through its RMBS Credit Model, an examination of the results from third-party loan file due diligence performed at the time of origination of the loans, cash flow modeling analysis of the transaction’s payment structure, reviews of key transaction parties and an assessment of the transaction’s legal structure and documentation.
The full report is available at www.kbra.com.