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Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to 52 classes of mortgage pass-through certificates from RCKT Mortgage Trust 2021-5 (RCKT 2021-5), the company said Thursday.
RCKT 2021-5 comprises 1,146 residential mortgages with an aggregate principal balance of approximately $1.8 billion as of the Nov. 1, 2021, cut-off date. The underlying collateral consists entirely of 30-year, fixed-rate mortgages, all of which are subject to the Ability-to-Repay/Qualified Mortgage (ATR/QM) rules.
KBRA assigned preliminary ratings as follows:
- A-4, A-10, A-12, A-16, A-21, A-21-X, A-26, A-X-1, A-X-3, A-X-6, A-X-7, A-X-9, A-X-12, A-X-13: 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’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, 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.
All loans in the subject pool were originated after the World Health Organization declaration of a worldwide pandemic on March 11, 2020, which was followed by global lockdown orders. KBRA expects loans underwritten post-pandemic to benefit from positive selection and tightened employment verification standards.
This expectation is somewhat tempered, however, for loans originated to self-employed borrowers, who were more adversely affected by the pandemic due to business closures and other COVID-related restriction measures. RCKT 2021-5 has a self-employment percentage of 33.2%, which is larger than the approximate 20% average rate seen in prime RMBS 2020 and 2021 (year to date).
All the mortgage loans in RCKT 2021-5 fall under the scope of the QM rules, with 100% of the loans designated as QM Safe Harbor (APOR) under QM 2.0. Consequently, KBRA made no additional adjustments with respect to the risks associated with potential litigation-related losses.