Kroll Bond Rating Agency, Inc. (KBRA) assigns preliminary ratings to six classes of mortgage-backed notes from Arroyo Mortgage Trust 2019-1 (ARRW 2019-1), a $291.8 million non-prime RMBS transaction.
ARRW 2019-1 is sponsored by Arroyo Mortgage Acquisition Company II LLC (AMAC II), an affiliate of Western Asset Management Company (WAMCO). The ARRW 2019-1 pool, comprising 753 residential mortgages, includes both seasoned performing (pre-implementation of the Ability-to Repay rule) and newly-originated non-prime collateral with a weighted average (WA) loan age of approximately 28 months (based on January 1, 2019 cut-off). The loans were underwritten primarily using non-traditional income documentation sources to borrowers with substantial equity. The pool contains both non-qualified mortgages (Non-QM; 57.8%) and loans that are exempt from the ATR rule (42.2%), including business purpose investor property loans and mortgages originated prior to implementation of the Ability-to Repay rule.
The underlying ARRW 2019-1 collateral consists of both hybrid adjustable-rate mortgages (87.4%) and fixed-rate mortgages (12.6%), with 1.9% of the loans possessing an interest-only period of five or seven years. Borrowers in the pool possess a WA original credit score of 744 and they exhibit substantial equity in each mortgaged property, with WA original loan-to-value (LTV) and combined LTV (CLTV) ratios of 60.6% and 60.7%, respectively.
KBRAs rating approach incorporated loan-level analysis of the mortgage pool through its Residential Mortgage Default and Loss Model, an examination of the results from third-party loan file due diligence, cash flow modeling, analysis of the transactions payment structure, reviews of key transaction parties and an assessment of the transactions legal structure and documentation. This analysis is further described in our U.S. RMBS Rating Methodology.
To access ratings, reports and disclosures, click here.
Related Publications: (available at www.kbra.com)
- ARRW 2019-1 Pre-Sale Report
- ARRW 2019-1 Tear Sheet
- U.S. RMBS Rating Methodology
- Residential Mortgage Default and Loss Model
- U.S. RMBS Rating Methodology for Assessing Non-QM Risk
- KBRA Expects TRID to Have Limited Impact on RMBS Enhancement Levels
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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
Gervais, Senior Director
Sharif Mahdavian, Senior Director
Jack Kahan, Managing Director