KBRA Assigns Preliminary Ratings to SG Residential Mortgage Trust 2019-3 (SGR 2019-3)

NEW YORK--()--Kroll Bond Rating Agency, Inc. (KBRA) assigns preliminary ratings to six classes of mortgage-backed notes from SG Residential Mortgage Trust 2019-3 (SGR 2019-3), a $442.9 million non-prime RMBS transaction.

SG Residential Mortgage Trust 2019-3 (SGR 2019-3) is a non-prime RMBS transaction sponsored by SG Capital Partners LLC (SGCP). The underlying collateral, comprising 780 residential mortgages, is characterized by moderate borrower leverage and a notable concentration of alternative income documentation, with 53.5% of the loans underwritten using 12- or 24-month bank statements. With respect to the Ability-to-Repay/Qualified Mortgage (ATR/QM) rule, approximately 83.9% of the loans were categorized as non-qualified mortgages (Non-QM). The remaining loans (16.1%) were categorized as QM Safe Harbor (3.9%), QM Rebuttable Presumption (1.7%) or being exempt from the ATR/QM rule (10.5%) due to being originated for business purposes (i.e., investment properties). SGR 2019-3 also includes loans originated to borrowers with prior credit events (21.7%) and foreign national borrowers (3.1%, where at least one borrower was a foreign national or non-permanent resident alien).

The pool has a non-zero weighted average (NZWA) original credit score of 718 and a WA debt-to-income (DTI) ratio of 36.7%. Borrowers in SGR 2019-3 exhibit considerable equity in each mortgaged property, as evidenced by the WA original loan-to-value (LTV) and combined LTV (CLTV) ratios of 71.9% and 72.0%, respectively. The pool has a WA loan age (WALA) of approximately seven months, and it includes both fixed rate mortgages (FRMs, 49.8%) and hybrid adjustable rate mortgages (ARMs, 50.2%). Most of the FRMs possess 30-year terms (47.2%), while the pool’s ARM loans include initial fixed rate periods of one (0.1%), five (33.6%), seven (14.5%) or ten (2.0%) years. Approximately 18.4% of the mortgages have an interest-only period, most of which last for the first ten years of the loan term.

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.

To access ratings, reports and disclosures, click here.

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 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. KBRA is also 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.

Contacts

Analytical Contacts:

Patrick Gervais, Senior Director
(646) 731-2426
pgervais@kbra.com

Edward DeVito, Managing Director
(646) 731-2319
edevito@kbra.com

Sharif Mahdavian, Senior Director
(646) 731-2301
smahdavian@kbra.com

Hannah Brennan, Analyst
(646) 731-3324
hbrennan@kbra.com

Jack Kahan, Senior Managing Director
(646) 731-2486
jkahan@kbra.com

Business Development Contact:

Michele Patterson, Managing Director
(646) 731-2397
mpatterson@kbra.com

Contacts

Analytical Contacts:

Patrick Gervais, Senior Director
(646) 731-2426
pgervais@kbra.com

Edward DeVito, Managing Director
(646) 731-2319
edevito@kbra.com

Sharif Mahdavian, Senior Director
(646) 731-2301
smahdavian@kbra.com

Hannah Brennan, Analyst
(646) 731-3324
hbrennan@kbra.com

Jack Kahan, Senior Managing Director
(646) 731-2486
jkahan@kbra.com

Business Development Contact:

Michele Patterson, Managing Director
(646) 731-2397
mpatterson@kbra.com