Classes M-2, M-2R, M-2S, M-2T, M-2U, M-2I, M-2AR, M-2AS, M-2AT, M-2AU, M-2AI, M-2BR, M-2BS, M-2BT, M-2BU, M-2BI, M-2RB, M-2SB, M-2TB, M-2UB, B-1, B-1AR, and B-1AI are Modifiable and Combinable STACR Notes (MAC Notes). Classes M-2I, M-2AI, M-2BI, and B-1AI are interest-only MAC Notes.
The BBB (sf), BB (high) (sf), BB (sf), B (high) (sf), and B (sf) ratings reflect 2.000%, 1.625%, 1.250%, 1.000%, and 0.750% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction.
STACR 2021-HQA3 is the 23rd transaction in the STACR HQA series. The Notes are subject to the credit and principal payment risk of a certain reference pool (the
As of the Cut-Off Date, the
On the Closing Date, the trust will enter into a Collateral Administration Agreement (CAA) with
The coupon rates for the Notes are based on the Secured Overnight Financing Rate (SOFR). There are replacement provisions in place in the event that SOFR is no longer available. DBRS Morningstar did not run interest rate stresses for this transaction, as the interest is not linked to the performance of the reference obligations. Instead, the trust will use the net investment earnings on the eligible investments together with
In this transaction, approximately 20.5% of the loans were originated using property values determined using
Notable Changes
This transaction incorporates below notable changes:
This is the first STACR HQA transaction with the Class B-3H's coupon rate to be zero. This may reduce the cushion that rated classes have to the extent any modification losses arise.
This is the first STACR transaction where payment deferrals will be treated as modification events and could lead to modification losses. Please see the PPM for more details.
The calculation of principal payments to the Notes will be based on actual principal collected on the
For the STACR 2021-HQA3 transaction, the minimum credit enhancement test-one of the three performance tests-has been set to fail at the Closing Date thus locking out the rated classes from initially receiving any principal payments until the subordination percentage grows from 3.25% to 3.50%. Additionally, the nonsenior tranches will also be entitled to supplemental subordinate reduction amount if the offered reference tranche percentage increases above 5.50%.
The interest payments for these transactions are not linked to the performance of the reference obligations except to the extent that modification losses have occurred.
The Notes will be scheduled to mature on the payment date in
The sponsor of the transaction will be
If a reference obligation is refinanced under the Enhanced Relief Refinance Program, then the resulting refinanced reference obligation may be included in the
The Coronavirus Disease (COVID-19) pandemic and the resulting isolation measures have caused an immediate economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. Shortly after the onset of the coronavirus, DBRS Morningstar saw an increase in the delinquencies for many residential mortgage-backed securities (RMBS) asset classes.
Such mortgage delinquencies were mostly in the form of forbearance, which are generally short-term periods of payment relief, that may perform differently from traditional delinquencies. At the onset of coronavirus, the option to forebear mortgage payments was widely available, droving forbearances to an elevated level. When the dust settled, loans with coronavirus-induced forbearance in 2020 performed better than expected, thanks to government aid and acceptable underwriting in the mortgage market in general. Across nearly all RMBS asset classes in recent months, delinquencies have been gradually trending downward, as forbearance periods come to an end for many borrowers.
For more information regarding rating methodologies and the coronavirus, please see the following DBRS Morningstar press releases and commentary: 'DBRS Morningstar Provides Update on Rating Methodologies in Light of Measures to Contain Coronavirus Disease (COVID-19),' dated
The ratings reflect transactional strengths that include the following:
Seller (or lender)/servicer approval process and quality control platform.
Well-diversified reference pool.
High-quality credit and loan attributes.
Strong alignment of interest.
Extensive performance history.
The transaction also includes the following challenges:
High LTV Loans
Representation and warranties framework.
Limited third-party due diligence.
Counterparty exposure.
The full description of the strengths, challenges, and mitigating factors is detailed in the related report.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
Notes:
All figures are in
The principal methodology is RMBS Insight 1.3:
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.
The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
Tel. +1 212 806-3277
Ratings
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-1 Provis.-New BBB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2A Provis.-New BB (high) (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2AI Provis.-New BB (high) (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2AR Provis.-New BB (high) (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2AS Provis.-New BB (high) (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2AT Provis.-New BB (high) (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2AU Provis.-New BB (high) (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2 Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2B Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2BI Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2BR Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2BS Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2BT Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2BU Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2I Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2R Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2RB Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2S Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2SB Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2T Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2TB Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2U Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class M-2UB Provis.-New BB (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class B-1A Provis.-New B (high) (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class B-1AI Provis.-New B (high) (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class B-1AR Provis.-New B (high) (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class B-1 Provis.-New B (sf) -- US
23-Sep-21 Structured Agency Credit Risk Debt Notes, Series 2021-HQA3, Class B-1B Provis.-New B (sf) -- US
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