KBRA Places Three Momnt Technologies Trust 2023-1 Ratings on Watch Downgrade
13 Dec 2024 | New York
KBRA has placed its ratings on three classes of notes issued on Momnt Technologies Trust 2023-1 (“MMNT 2023-1”), a home improvement loan transaction, on Watch Downgrade. The Watch Placement reflects a deterioration in collateral credit performance evidenced by increasing cumulative net loss (“CNL”) volumes. The CNL volume has resulted in the breach of Cumulative Default Ratio Amortization Event (“CNL Triggers”) Level I and Level II Triggers.
The Level I and Level II CNL Triggers breaches resulted in the utilization of reserve account funds to de-lever the transaction and in the deferral of interest payments on the Class C notes until Class A and Class B notes have been paid in full. If the Level III trigger breach were to occur, the result would be a deferral in the payment of interest on the Class B notes until the Class A note is paid in full.
In addition to the transaction performance, Momnt Technologies Inc. (“Momnt” or the “Company”) reported instances of fraud which it identified due to an increase in the number of customer complaints relating to certain merchants. Momnt identified nine merchants as associated with cases of identity theft and subsequently terminated these merchants. In September 2024, approximately $4.5 million of related loans were repurchased from MMNT 2023-1 due to breach of representations and warranties. These updates come in addition to the transaction amendment completed in April 2024 to address a shortfall in collateral that occurred after the first Payment Date. For a detailed explanation refer to “KBRA Comments on Amendment to Momnt Technologies Trust 2023-1”. KBRA has engaged in discussions with Momnt to assess operational changes intended to prevent similar issues in the future.
The table below displays the current capital structure and Watch Placements undertaken in this review. To date, the Class A and Class B notes have received timely interest payments; however, the Class C note is currently deferring interest due to the aforementioned Level II CNL Trigger breach.
CNL and delinquencies for the transaction as of the November 2024 distribution date (October 2024 collection period) are shown in the charts below. CNL is above KBRA’s base case assumption at comparable month of seasoning.
KBRA will continue to monitor the performance of the transactions and will seek to resolve the Watch Placement once additional clarity of the situation is obtained.
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