KBRA Affirms and Upgrades Ratings from 50 RMBS Transactions; Places 38 Classes from GFMT 2019-1 on Watch Developing

KBRA recently reviewed the ratings from 51 RMBS transactions, resulting in 1,631 rating affirmations and 36 rating upgrades, along with the placement of 38 ratings from Galton Funding Mortgage Trust 2019-1 (GFMT 2019-1) on Watch Developing. The related transactions are listed further below with links to the appropriate page on KBRA.com which show the applicable ratings. The affirmations reflect generally stable collateral and structure performance, as evidenced by increased credit support for rated classes and minimal losses since issuance. The rating upgrades considered each security’s credit support relative to KBRA’s updated loss expectations, as well as the generally positive performance trends exhibited by the related underlying pool since issuance.

KBRA is placing all outstanding ratings from GFMT 2019-1 on Watch Developing following the occurrence of interest rate shortfalls on certain rated classes. KBRA previously placed seven subordinate classes from GFMT 2019-1 on Watch Developing in November 2024. KBRA notes that none of the rated classes have experienced principal losses, and the interest shortfalls have not been of a size or duration such that it would prompt rating actions at this time; however, KBRA is evaluating the potential duration of the shortfalls. Certain rated classes—classes B3, B4 and B5, have had outstanding interest shortfalls as of September 2024. KBRA communicated with the trustee to gain insight into the cause of the interest shortfalls. KBRA is monitoring the ongoing recoveries of these interest shortfalls and will consider the associated timing and recovery as part of its Watch resolution.

KBRA performed its analysis in accordance with its RMBS methodology. In performing these rating actions, KBRA considered transaction performance to date, updated home values via home price indexation, updated expected loss estimates, and capital structure behavior under various cash flow stress scenarios, where applicable. The rating actions, along with related deal and tranche performance information, are available in spreadsheet form in the accompanying KBRA RMBS Surveillance KCAT.

Certain subordinate classes of the transactions listed below may have experienced losses and/or interest shortfalls. However, KBRA notes that none of the rated classes have experienced losses.

We note that, in general, these RMBS assets and liabilities can have long weighted average lives and structural features that provide for changes in payment priority over time. KBRA often considers seasoning in determining the extent of positive rating actions effectuated in a manner that also considers a transaction’s structure. This includes features such as the remaining size of more senior certificates, principal payments to subordinate tranches, and credit enhancement floor provisions. These features are weighed against, among other things, the tenor of the rated classes and the length of performance history associated with the collateral pool. In light of these considerations, KBRA has taken the rating actions as discussed above, determining that the rated classes were able to withstand the rating stresses applied within an acceptable tolerance.

For additional information regarding a specific transaction, see the list below to access ratings, reports, and disclosures:

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