Fitch Rates GS Mortgage-Backed Securities Trust 2021-RPL1
(The following statement was released by the rating agency)Fitch Ratings-New York-16 March 2021:
Fitch Ratings has assigned ratings to GS Mortgage-Backed Securities Trust 2021-RPL1.
GS Mortgage-Backed Securities Trust 2021-RPL1
----A-1 ; Long Term Rating; New Rating; AAAsf; Rating Outlook Stable
----A-2 ; Long Term Rating; New Rating; AAsf; Rating Outlook Stable
----A-3 ; Long Term Rating; New Rating; AAsf; Rating Outlook Stable
----A-4 ; Long Term Rating; New Rating; Asf; Rating Outlook Stable
----A-5 ; Long Term Rating; New Rating; BBBsf; Rating Outlook Stable
----M-1 ; Long Term Rating; New Rating; Asf; Rating Outlook Stable
----M-2 ; Long Term Rating; New Rating; BBBsf; Rating Outlook Stable
----B-1 ; Long Term Rating; New Rating; BBsf; Rating Outlook Stable
----B-2 ; Long Term Rating; New Rating; Bsf; Rating Outlook Stable
----B-3 ; Long Term Rating; New Rating; NRsf
----B-4 ; Long Term Rating; New Rating; NRsf
----B-5 ; Long Term Rating; New Rating; NRsf
----B ; Long Term Rating; New Rating; NRsf
----PT ; Long Term Rating; New Rating; NRsf
----AIOS ; Long Term Rating; New Rating; NRsf
----R ; Long Term Rating; New Rating; NRsf
----RI ; Long Term Rating; New Rating; NRsf
----SA ; Long Term Rating; New Rating; NRsf
----X ; Long Term Rating; New Rating; NRsf
The notes are supported by one collateral group that consists of 2,080 seasoned performing loans (SPLs) and reperforming loans (RPLs) with a total balance of approximately $384.9 million, which includes $40.5 million of the aggregate pool balance in non-interest-bearing deferred principal amounts as of the cutoff date.
Distributions of P&I and loss allocations are based on a traditional senior-subordinate, sequential structure. The sequential-pay structure locks out principal to the subordinated notes until the most senior notes outstanding are paid in full. The servicers will not be advancing delinquent monthly payments of P&I.
KEY RATING DRIVERS
RPL Credit Quality (Mixed): The collateral consists of 30-year FRM and five-year ARM fully amortizing loans, seasoned approximately 173 months in aggregate. The borrowers in this pool have weaker credit profiles (650 Fitch model FICO) and relatively high leverage (86% sLTV). In addition, the pool contains no loans of particularly large size. 47% of the pool had a delinquency in the past 24 months but is current as of the cut-off date.
Geographic Concentration (Neutral): Approximately 19% of the pool is concentrated in California. The largest Fitch-derived MSA concentration is in the New York-Northern New Jersey-Long Island, NY-NJ-PA MSA (14.3%), followed by the Los Angeles-Long Beach-Santa Ana, CA MSA (6.5%) and the Washington-Arlington-Alexandria, DC-VA-MD MSA (5.3%). The top three MSAs account for 26.1% of the pool. As a result, there was no adjustment for geographic concentration.
Transaction Structure (Positive): The transaction's cash flow is based on a sequential-pay structure whereby the subordinate classes do not receive principal until the senior classes are repaid in full. Losses are allocated in reverse-sequential order.
No Servicer Advancing (Mixed): The servicers will not be advancing delinquent monthly payments of principal and interest. Because P&I advances made on behalf of loans that become delinquent and eventually liquidate reduce liquidation proceeds to the trust, the loan-level loss severities (LS) are less for this transaction than for those where the servicer is obligated to advance P&I.
Low Operational Risk (Positive Operational risk is well controlled for in this transaction. Goldman Sachs has an established operating history acquiring RPL single family residential loans and is assessed as an 'Average' aggregator by Fitch. Select Portfolio Servicing (SPS) is the named servicer for the transaction and is rated by Fitch 'RPS1-'. Due to the benefit given for the servicers, the 'AAA' expected loss was decreased by 281 bps.
Representation Framework (Negative): The loan-level representations and warranties (R&Ws) are consistent with a Tier 2 framework. The tier assessment is based primarily on the inclusion of knowledge qualifiers in the underlying reps as well as a breach reserve account that replaces the Sponsor's responsibility to cure any R&W breaches following the established sunset period. Fitch increased its loss expectations by 240bps at the 'AAAsf' rating category to reflect both the limitations of the R&W framework as well as the non-investment-grade counterparty risk of the provider.
Due Diligence Review Results (Negative): A third-party due diligence review was performed on 96% of the loans in the transaction pool as it relates to compliance. The review was performed by multiple TPR firms; SitusAMC (which is assessed by Fitch as an 'Acceptable - Tier 1' TPR firm) reviewed the largest portion of loans (77.6%). The due diligence results indicate moderate operational risk with 12% of loans receiving a final grade of 'C' or 'D'. While this concentration of material exceptions is similar to other Fitch-rated RPL RMBS, adjustments were applied only to loans missing final HUD-1 documents that are subject to testing for compliance with predatory lending regulations. These regulations are not subject to statute of limitations like most compliance findings which ultimately exposes the trust to added assignee liability risk. Fitch adjusted its loss expectation at the 'AAAsf' rating category by less than 25 bps to account for this added risk as well as outstanding taxes.
Fitch incorporates a sensitivity analysis to demonstrate how the ratings would react to steeper MVDs than assumed at the MSA level. The implied rating sensitivities are only an indication of some of the potential outcomes and do not consider other risk factors that the transaction may become exposed to or that may be considered in the surveillance of the transaction. Sensitivity analyses were conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, as illustrated by a gain in home prices.
Factors that could, individually or collectively, lead to a negative rating action/downgrade:
This defined negative rating sensitivity analysis demonstrates how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the model-projected 38.5% at 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Specifically, a 10% additional decline in home prices would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to a positive rating action/upgrade:
This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10%. Excluding the senior class, which is already rated 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Specifically, a 10% gain in home prices would result in a full category upgrade for the rated class excluding those assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modeling process uses the modification of these variables to reflect asset performance in up- and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance.
Fitch has added a coronavirus sensitivity analysis including a prolonged health crisis resulting in depressed consumer demand and a protracted period of below-trend economic activity that delay any meaningful recovery to beyond 2021. Under this severe scenario, Fitch expects the ratings to be affected by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment- and speculative-grade ratings.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
There were three variations to Fitch's U.S. RMBS Rating Criteria, all related to due diligence: --A majority of the pool had a tax and title search completed outside of six months. Fitch did not make any additional adjustments as the amounts that were outstanding as of the search date were minor compared with the pool balance and some of them may have already been resolved since the servicer is obligated to cure them. Fitch included the amounts that were confirmed to be due as of the time the search was conducted in its loss analysis and no additional adjustments were applied. --A due diligence review was not completed on 100% of the pool. A small portion of the pool did not have a compliance search conducted. Fitch considered the amount that was not performed to be immaterial and treated those loans as 'high cost uncertain,' which received a small loss severity adjustment. --The pay history review was not conducted on 100% of the loans. A small portion of the loans did not have a pay history review conducted. Given the lack of differences on the portion that was conducted as well as the blemished pay histories in the portion with no review, no additional adjustments were made.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by multiple providers. The third-party due diligence described in Form 15E focused on on a regulatory compliance review that covered applicable federal, state and local high-cost loan and/or anti-predatory laws, as well as the Truth In Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). The scope was consistent with published Fitch criteria for due diligence on RPL RMBS. Fitch considered this information in its analysis and, as a result, Fitch made the following adjustment(s) to its analysis:
--201 loans were unable to test for compliance for predatory lending and were given a 5% loss severity increase or a 100% loss severity over-ride based on the state;
--109 loans had missing modification agreements and received a three month timeline extension to the liquidation timeline;
--203 loans had unpaid taxes or liens and these amounts were added to Fitch's model loss severity.
These adjustments resulted in a less than 25bps increase to the 'AAAsf' expected loss.
The data provided was deemed to be adequate in support of the assigned ratings.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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Additional information is available on www.fitchratings.com
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
U.S. RMBS Cash Flow Assumptions Model, v2.10.4 (1)
Third-party Model(26 February 2021)
US RMBS Loan Loss Model (Excel platform), v5.9.3 (1)
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1
ABS Due Diligence Form 15E 2
ABS Due Diligence Form 15E 3
ABS Due Diligence Form 15E 4
ABS Due Diligence Form 15E 5
ABS Due Diligence Form 15E 6
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