GS Mortgage-Backed Securities Trust 2022-MM1 -- Moody's assigns definitive ratings to Prime RMBS issued by GS Mortgage-Backed Securities Trust 2022-MM1

Rating Action: Moody's assigns definitive ratings to Prime RMBS issued by GS Mortgage-Backed Securities Trust 2022-MM1Global Credit Research - 08 Feb 2022New York, February 08, 2022 -- Moody's Investors Service ("Moody's") has assigned definitive ratings to 38 classes of residential mortgage-backed securities (RMBS) issued by GS Mortgage-Backed Securities Trust 2022-MM1. The ratings range from Aaa (sf) to B3 (sf).GS Mortgage-Backed Securities Trust 2022-MM1 (GSMBS 2022-MM1) is the second prime jumbo transaction in 2022 issued by Goldman Sachs Mortgage Company (GSMC), the sponsor and the primary mortgage loan seller. Overall, pool strengths include the high credit quality of the underlying borrowers, indicated by high FICO scores, strong reserves for prime jumbo borrowers, mortgage loans with fixed interest rates and no interest-only loans. As of the cut-off date, none of the mortgage loans are subject to a COVID-19 related forbearance plan.GSMC's general partner is Goldman Sachs Real Estate Funding Corp. and its limited partner is Goldman Sachs Bank USA. The mortgage loans for this transaction were acquired by GSMC, the sponsor and the primary mortgage loan seller (100% by UPB). All the loans in the pool are originated by Movement Mortgage, LLC (Movement Mortgage).NewRez LLC (formerly known as New Penn Financial, LLC) d/b/a Shellpoint Mortgage Servicing (Shellpoint) will service all of the loans in the pool. Computershare Trust Company, N.A. (CTCNA) will be the master servicer and securities administrator. U.S. Bank Trust National Association will be the trustee. Pentalpha Surveillance LLC will be the representations and warranties (R&W) breach reviewer.We analyzed the underlying mortgage loans using Moody's Individual Loan Analysis (MILAN) model. In addition, we adjusted our losses based on qualitative attributes, including origination quality, the strength of the R&W framework and third-party review (TPR) results.Distributions of principal and interest and loss allocations are based on a typical shifting interest structure with a five-year lockout period that benefits from a senior and subordination floor. We coded the cash flow to each of the certificate classes using Moody's proprietary cash flow tool.The complete rating actions are as follows:Issuer: GS Mortgage-Backed Securities Trust 2022-MM1 Cl. A-1, Assigned Aaa (sf) Cl. A-2, Assigned Aaa (sf) Cl. A-3, Assigned Aa1 (sf) Cl. A-4, Assigned Aa1 (sf) Cl. A-5, Assigned Aaa (sf) Cl. A-6, Assigned Aaa (sf) Cl. A-7, Assigned Aaa (sf) Cl. A-7-X*, Assigned Aaa (sf) Cl. A-8, Assigned Aaa (sf) Cl. A-9, Assigned Aaa (sf) Cl. A-10, Assigned Aaa (sf) Cl. A-11, Assigned Aaa (sf) Cl. A-11-X*, Assigned Aaa (sf) Cl. A-12, Assigned Aaa (sf) Cl. A-13, Assigned Aaa (sf) Cl. A-14, Assigned Aaa (sf) Cl. A-15, Assigned Aaa (sf) Cl. A-15-X*, Assigned Aaa (sf)Cl. A-16, Assigned Aaa (sf)Cl. A-17, Assigned Aaa (sf)Cl. A-17-X*, Assigned Aaa (sf)Cl. A-18, Assigned Aaa (sf)Cl. A-18-X*, Assigned Aaa (sf) Cl. A-19, Assigned Aaa (sf) Cl. A-20, Assigned Aaa (sf) Cl. A-21, Assigned Aa1 (sf) Cl. A-X-1*, Assigned Aa1 (sf)Cl. A-X-2*, Assigned Aaa (sf)Cl. A-X-3*, Assigned Aa1 (sf)Cl. A-X-4*, Assigned Aa1 (sf)Cl. A-X-5*, Assigned Aaa (sf)Cl. A-X-9*, Assigned Aaa (sf)Cl. A-X-13*, Assigned Aaa (sf) Cl. B-1, Assigned Aa3 (sf) Cl. B-2, Assigned A3 (sf) Cl. B-3, Assigned Baa3 (sf) Cl. B-4, Assigned Ba3 (sf) Cl. B-5, Assigned B3 (sf) *Reflects Interest-Only ClassesRATINGS RATIONALESummary Credit Analysis and Rating RationaleMoody's expected loss for this pool in a baseline scenario-mean is 0.57%, in a baseline scenario-median is 0.38% and reaches 4.15% at stress level consistent with our Aaa rating.We base our ratings on the certificates on the credit quality of the mortgage loans, the structural features of the transaction, our assessments of the origination quality and servicing arrangement, strength of the TPR and the R&W framework of the transaction.Collateral DescriptionAs of the January 1, 2022 cut-off date, the aggregate collateral pool comprises 359 prime jumbo (non-conforming), 30-year loan-term, fully-amortizing fixed-rate mortgage loans, none of which have the benefit of primary mortgage guaranty insurance, with an aggregate stated principal balance (UPB) $375,841,374 and a weighted average (WA) mortgage rate of 3.0%. The WA current FICO score of the borrowers in the pool is 769 and the WA original LTV ratio of the mortgage pool is 74.0%. Top 10 MSAs comprise 57.2% of the pool by UPB. The high geographic concentration in high cost MSAs is reflected in the high average loan balance of the pool ($1,046,912). The characteristics of the mortgage loans in the pool are generally comparable to that of recent prime jumbo transactions rated by us.All the mortgage loans in the aggregate pool are qualified mortgages (QMs) meeting the requirements of the new General QM rule. The third-party reviewer verified that the loans' APRs met the QM rule's thresholds. Furthermore, these loans were underwritten and documented pursuant to the QM rule's verification safe harbor via a mix of the Fannie Mae Single Family Selling Guide, the Freddie Mac Single-Family Seller/Servicer Guide, and applicable program overlays. As part of the origination quality review and in consideration of the detailed loan-level third-party diligence reports, which included supplemental information with the specific documentation received for each loan, we concluded that these loans were fully documented loans, and that the underwriting of the loans is acceptable. Therefore, we ran these loans as "full documentation" loans in our MILAN model, but increased our Aaa and expected loss assumptions due to the lack of performance, track record and substantial overlays of the AUS-underwritten loans.Aggregator/Origination QualityGSMC is the loan aggregator and the primary mortgage seller for the transaction. GSMC's general partner is Goldman Sachs Real Estate Funding Corp. and its limited partner is Goldman Sachs Bank USA. Goldman Sachs Real Estate Funding Corp. is a wholly owned subsidiary of Goldman Sachs Bank USA. GSMC is an affiliate of Goldman Sachs & Co. LLC. GSMC is overseen by the mortgage capital markets group within Goldman Sachs. Senior management averages 16 years of mortgage experience and 15 years of Goldman Sachs tenure. The mortgage loans for this transaction were acquired by GSMC, the sponsor and the primary mortgage loan seller (100.0% by UPB). All the loans in the pool are originated by Movement Mortgage. The mortgage loan seller does not originate any mortgage loans, including the mortgage loans included in the mortgage pool. Instead, the mortgage loan seller acquired the mortgage loans pursuant to contracts with the originator.Overall, we consider GSMC's aggregation platform to be comparable to that of peer aggregators and therefore did not apply a separate loss-level adjustment for aggregation quality. In addition to reviewing GSMC's aggregation quality, we have also reviewed the origination quality of Movement Mortgage which originated 100% of the mortgage loans to the transaction. We reviewed their underwriting guideline, performance history, and quality control and audit processes and procedures (to the extent available, respectively). We applied an adjustment for Movement Mortgage loans originated under the new QM rules as more time is needed to fully evaluate this origination program and due to limited performance history of these type of loans and prime jumbo loans in general.Servicing ArrangementWe consider the overall servicing arrangement for this pool to be adequate, and as a result we did not make any adjustments to our base case and Aaa stress loss assumptions based on the servicing arrangement.Shellpoint will service 100% of the pool. Shellpoint is an approved servicer in good standing with Ginnie Mae, Fannie Mae and Freddie Mac. Shellpoint's primary servicing location is in Greenville, South Carolina. Shellpoint services residential mortgage assets for investors that include banks, financial services companies, GSEs and government agencies. CTCNA will act as master servicer.Third-party ReviewThe transaction benefits from TPR on 100% of the mortgage loans for regulatory compliance, credit and property valuation. The TPR results confirm compliance with the originator's underwriting guidelines for the vast majority of loans, no material regulatory compliance issues, and no material property valuation issues. The loans that had exceptions to the originator's underwriting guidelines had significant compensating factors that were documented.Representations & WarrantiesGSMBS 2022-MM1's R&W framework is in line with that of prior GSMBS transactions we have rated where an independent reviewer is named at closing, and costs and manner of review are clearly outlined at issuance. Our review of the R&W framework takes into account the financial strength of the R&W providers, scope of R&Ws (including qualifiers and sunsets) and the R&W enforcement mechanism. The loan-level R&Ws meet or exceed the baseline set of credit-neutral R&Ws we have identified for US RMBS. R&W breaches are evaluated by an independent third-party using a set of objective criteria. The transaction requires mandatory independent reviews of mortgage loans that become 120 days delinquent and those that liquidate at a loss to determine if any of the R&Ws are breached. There is a provision for binding arbitration in the event of a dispute between the trust and the R&W provider concerning R&W breaches.The creditworthiness of the R&W provider determines the probability that the R&W provider will be available and have the financial strength to repurchase defective loans upon identifying a breach. An investment-grade rated R&W provider lends substantial strength to its R&Ws. We analyze the impact of less creditworthy R&W providers case by case, in conjunction with other aspects of the transaction. Here, because the R&W provider is unrated and/or exhibits limited financial flexibility, we applied an adjustment to the mortgage loans.Tail Risk and Locked Out PercentageThe transaction cash flows follow a shifting interest structure that allows subordinated bonds to receive principal payments under certain defined scenarios. Because a shifting interest structure allows subordinated bonds to pay down over time as the loan pool balance declines, senior bonds are exposed to eroding credit enhancement over time, and increased performance volatility as a result. To mitigate this risk, the transaction provides for a senior subordination floor of 1.45% of the cut-off date pool balance, and as subordination lock-out amount of 1.45% of the cut-off date pool balance. The floors are consistent with the credit neutral floors for the assigned ratings according to our methodology.Factors that would lead to an upgrade or downgrade of the ratings:DownLevels of credit protection that are insufficient to protect investors against current expectations of loss could drive the ratings down. Losses could rise above Moody's original expectations as a result of a higher number of obligor defaults or deterioration in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance and fraud.UpLevels of credit protection that are higher than necessary to protect investors against current expectations of loss could drive the ratings up. Losses could decline from Moody's original expectations as a result of a lower number of obligor defaults or appreciation in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market.MethodologyThe principal methodology used in rating all classes except interest-only classes was "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1271478. The methodologies used in rating interest-only classes were "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1271478 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies. Please note that a Request for Comment was published in which Moody's requested market feedback on potential revisions to one or more of the methodologies used in determining these Credit Ratings. If the revised methodologies are implemented as proposed, it is not currently expected that the Credit Ratings referenced in this press release will be affected. Request for Comments can be found on the rating methodologies page on www.moodys.comREGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1317770.The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Pavan Prema Kumar Asst Vice President - Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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