KBRA Assigns Preliminary Ratings to Starwood Mortgage Residential Trust 2020-1 (STAR 2020-1)

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to 20 classes of mortgage pass-through certificates from Starwood Mortgage Residential Trust 2020-1 (STAR 2020-1), a $381.3 million non-prime residential mortgage-backed securities (RMBS) transaction.

STAR 2020-1 is sponsored by Starwood Non-Agency Lending, LLC, a division of Starwood Capital Group (SCG). The STAR 2020-1 pool, comprising 605 mortgages, includes loans underwritten using alternative documentation sources such as 12-month bank statements (65.9%), 24-month bank statements (16.9%) and asset qualification (6.3%), as well as borrowers with prior credit events (6.9%). Additionally, STAR 2020-1 contains a smaller subset of loans (11.0%), with more traditional full documentation, which KBRA generally considers to be expanded prime due to certain loan or borrower characteristics, such as loans that would typically require exceptions to prime/super-prime guidelines with compensating factors. Of the loans subject to the Ability-to-Repay (ATR) rule, all are classified as Non-QM (78.1%), and the rest are exempt from the ATR rule (21.9%) as the loans were originated for investment properties.

The underlying STAR 2020-1 collateral consists of both fixed rate mortgages (FRMs, 38.6%) and hybrid adjustable rate mortgages (ARMs, 61.4%), most of which have 30-year terms (98.9%). The hybrid ARMs have initial fixed rate periods of five (46.1%), seven (12.6%) or ten (2.7%) years. Approximately 23.5% of the loans have interest-only periods, ranging from one to ten years. Loans in the pool exhibit substantial borrower equity, as evidenced by the WA original LTV of 70.1% and CLTV of 70.1%. The pool has a WA original credit score of 734, and a WA loan age of 5 months.

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)

• STAR 2020-1 Pre-Sale Report
• STAR 2020-1 Tear Sheet
• STAR 2020-1 Representations & Warranties Disclosure
• U.S. RMBS Rating Methodology
• Residential Mortgage Default and Loss Model
• U.S. RMBS Rating Methodology for Assessing Non-QM Risk
• Global Structured Finance Counterparty Methodology
• RMBS KBRA Comparative Analytic Tool (KCAT)

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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.