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Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to 46 classes of mortgage pass-through certificates from RCKT Mortgage Trust 2021-4.
RCKT 2021-4 is a prime residential mortgage-backed security (RMBS) transaction issued by Woodward Capital Management LLC. It comprises 1,002 residential mortgages with an aggregate principal balance of $968.4 million as of the Sept. 1, 2021, cut-off date. The underlying collateral consists entirely of 30-year fixed-rate mortgages originated by Rocket Mortgage LLC, all of which are subject to the Ability-to-Repay/Qualified Mortgage (ATR/QM) rules.
The preliminary ratings assigned by KBRA are as follows:
- A-4, A-10, A-12, A-16, A-22, A-X-1, A-X-3, A-X-6, A-X-7, A-X-9, and A-X-12: AAA
- B-1, B-X-1: AA+
- B-2, B-X-2: A+
- B-3: BBB+
- B-4: BB+
- B-5: B+
- B-6, R, LT-R: Not rated.
KBRA said its 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, 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.
In December 2020, the Consumer Financial Protection Bureau (CFPB) issued the General QM Final Rule (QM 2.0) which took effect for loans with application dates on or after March 1, 2021. While mandatory compliance with QM 2.0 has not yet taken effect, all the mortgage loans in RCKT 2021-4 fall under the scope of the QM rules, with 100% of the loans designated as QM Safe Harbor (average prime offer rate) under QM 2.0.
All loans in the pool were originated after the World Health Organization declared a worldwide pandemic on March 11, 2020, which was followed by global lockdown orders. KBRA said it expects loans underwritten post-pandemic to benefit from positive selection and tightened employment verification standards. However, it said, this expectation is somewhat tempered for loans originated to self-employed borrowers, who were more adversely affected by the pandemic due to business closures and other COVID-related restrictions. RCKT 2021-4 has a self-employment percentage of 35.7%, which is larger than the approximate 20% average rate seen in prime RMBS 2020 and 2021 (YTD).
To view the full report, visit www.kbra.com.