KBRA Assigns Ratings to Arroyo Mortgage Trust 2018-1 (ARRW 2018-1)

NEW YORK--()--Kroll Bond Rating Agency, Inc. (KBRA) assigns ratings to six classes of mortgage pass-through certificates from Western Asset Management Company’s inaugural non-prime RMBS securitization, Arroyo Mortgage Trust 2018-1 (ARRW 2018-1).

Arroyo Mortgage Trust 2018-1 (ARRW 2018-1) is the first residential mortgage-backed securities (RMBS) transaction issued by the Sponsor (Arroyo Mortgage Acquisition Company I, LLC) an affiliate of Western Asset Management Company (WAMCO Fund). The transaction includes both seasoned performing (pre-implementation of the Ability-to Repay rule) and newly-originated non-prime collateral with a weighted average life (WAL) of 20.1 months. The loans were primarily underwritten using non-traditional income documentation sources to borrowers with substantial equity. The collateral pool contains both non-qualified mortgages (Non-QM) and loans that are exempt from the ATR rule such as: investor properties and loans originated prior to implementation of the Ability-to Repay rule. The $1.25 billion RMBS transaction is collateralized by a pool of 3,160 residential mortgages.

The underlying collateral consists of hybrid adjustable rate mortgages (96.4%) and fully-amortizing fixed-rate loans (3.6%), including interest only loans (1.7%) with seven-year interest only periods. Loans in the pool exhibit substantial borrower equity in each mortgaged property, as evidenced by the WA original LTV and CLTV of 60.8%. Additionally, ARRW 2018-1 exhibits the third lowest WA original LTV of any KBRA rated transaction. The weighted average original credit score is 743.

KBRA’s 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 transaction’s payment structure, reviews of key transaction parties and an assessment of the transaction’s legal structure and documentation. This analysis is further described in our U.S. RMBS Rating Methodology.

For complete details on the analysis, please see our pre-sale report, Arroyo Mortgage Trust 2018-1, which was published on April 27, 2018 on www.kbra.com.

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled, ARRW 2018-1 Trust Representations and Warranties Disclosure.

Related Publications: (available at www.kbra.com)


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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and 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.

Contacts

Analytical Contacts:
Kroll Bond Rating Agency, Inc.
Edward DeVito, Senior Director, 646-731-2319
edevito@kbra.com
or
Patrick Gervais, Senior Director, 646-731-2426
pgervais@kbra.com
or
Jack Kahan, Managing Director, 646-731-2486
jkahan@kbra.com
or
Ryon Aguirre, Associate Director, 646-731-2382
raguirre@kbra.com

Contacts

Analytical Contacts:
Kroll Bond Rating Agency, Inc.
Edward DeVito, Senior Director, 646-731-2319
edevito@kbra.com
or
Patrick Gervais, Senior Director, 646-731-2426
pgervais@kbra.com
or
Jack Kahan, Managing Director, 646-731-2486
jkahan@kbra.com
or
Ryon Aguirre, Associate Director, 646-731-2382
raguirre@kbra.com