KBRA Assigns Ratings to L Street Securities Trust 2020-PMT1

Kroll Bond Rating Agency (KBRA) assigns ratings to 15 classes from L Street Securities Trust 2020-PMT1 (LSS 2020-PMT1), a credit risk sharing transaction with a total note offering of $1,700,000,000. LSS 2020-PMT1 features credit exposure to Reference Obligations with original loan-to-value (LTV) ratios greater than 60% but less than or equal to 97%. The Offered Notes will be governed in part by the Collateral Administration Agreement (CAA) and the Capital Contribution Agreement (CCA) between the Issuer (credit protection seller) and Fannie Mae (credit protection buyer). The CAA and the CCA represent unsecured contractual obligations of Fannie Mae.

The LSS 2020-PMT1 Reference Pool consists of 153,050 residential mortgage loans with an outstanding principal balance of approximately $43.6 billion as of the Cut-Off Date. The Reference Obligations are fully documented, fully amortizing, primarily 30-year fixed-rate mortgages (FRMs) of prime quality. The borrowers in the LSS 2020-PMT1 Reference Pool have a non-zero WA (NZWA) original credit score of 758 and a NZWA debt-to-income (DTI) ratio of 35.2%.

Fannie Mae has been actively working with its sellers and servicers to help borrowers who have been affected by and experienced hardships due to COVID-19, and this pool is notable for having 6.9% loans currently in forbearance plans. Any resulting losses from COVID-related forbearance plans are specifically noted as being included as Modification Events for which investors can expect to bear related losses. It should be noted that errors or lags in servicer reporting for the Reference Obligations may result in forbearance statuses that differ from the statuses provided as of the cut-off date. As the effects of the pandemic are still evolving and have already caused a contraction in the economy, it is likely that some borrowers can be expected to be placed into forbearance plans in the future.

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.

Click here to view the report. To access ratings and relevant documents, click here.

Related Publications

• LSS 2020-PMT1 Tear Sheet
• RMBS KBRA Comparative Analytic Tool (KCAT)
• Residential Mortgage Default and Loss Model
• U.S. RMBS Rating Methodology
• Global Structured Finance Counterparty Methodology
• U.S. RMBS Rating Methodology Assessing Non-QM Risk

   

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. 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) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.

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