Kroll Bond Rating Agency Assigns Preliminary Ratings to Invitation Homes 2014-SFR1

Business Wire


Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to six classes of Invitation Homes 2014-SFR1 (IH 2014-SFR1) mortgage pass-through certificates.

IH 2014-SFR1 is a single-family rental (SFR) securitization that will be collateralized by a $1,006 million loan secured by mortgages on 6,537 income-producing single-family homes. This is Invitation Homes’ second securitization. The loan backing the securitization will be a non-recourse, first lien, floating rate mortgage loan originated by German American Capital Corporation on the securitization closing date and funded with proceeds of the sale of the certificates. The floating rate loan will require interest only payments and have a two-year term with three 12-month extension options. The underlying properties are one to four unit residential properties located in ten states, with the top three representing 70% of the portfolio (Florida (32.0%), California (26.8%), and Arizona (10.8%).

KBRA used a hybrid analysis to evaluate the SFR transaction, which incorporated elements of both our commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS) methodologies, as the underlying real estate contains commercial and residential characteristics. As the properties generate a cash flow stream from tenant rental payments, CMBS methodologies were used to determine the loan’s probability of default (PD). To determine loss given default (LGD), KBRA assumed the underlying collateral properties would be liquidated in the residential property market.

The loan will be secured by first priority mortgages on the properties, and a grant of a security interest in all personal property of the borrower. KBRA considers the mortgage structure to be superior to a loan secured solely by an equity pledge because the trust will have a first priority lien and security interest in the properties. Therefore, if the trust were to exercise remedies following a default, it would be able to acquire the properties, as opposed to having its recovery limited to the sponsor’s equity. The utilization of mortgages in this transaction was essential in assigning an ‘AAA’ rating.

For details on KBRA’s analysis, see the pre-sale report: Invitation Homes 2014-SFR1 Pre-Sale Report.

Class       Rating       Class Principal
A       AAA(sf)       $ 483,369,000
B       AA+(sf)       $ 123,588,000
C       A+(sf)       $ 109,857,000
D       BBB+(sf)       $ 85,139,000
E       BBB-(sf)       $ 94,253,000
F       BB-(sf)       $ 109,794,000

Related publications:

CMBS Property Evaluation Guidelines

U.S. CMBS Multi-borrower Rating Methodology

U.S. RMBS Rating Methodology, published January 9, 2012

Residential Mortgage Default and Loss Model, published January 9, 2012

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Kroll Bond Rating Agency
Michele Patterson, 646-731-2397
Nitin Bhasin, 646-731-2334
Keith Kockenmeister, 646-731-2349
Andrew Giudici, 646-731-2372

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