Invitation Homes 2018-SFR1 Trust -- Moody's upgrades $418.8 million from two transactions issued by Invitation Homes

Rating Action: Moody's upgrades $418.8 million from two transactions issued by Invitation HomesGlobal Credit Research - 15 Dec 2021New York, December 15, 2021 -- Moody's Investors Service ("Moody's") has upgraded the ratings of four tranches from two transactions, backed by loans secured by a pool of single family rental propertiesPlease click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL460178 the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.Complete rating actions are as follows:Issuer: Invitation Homes 2018-SFR1 TrustCl. B, Upgraded to Aaa (sf); previously on Feb 8, 2018 Definitive Rating Assigned Aa2 (sf)Cl. C, Upgraded to Aa2 (sf); previously on Feb 8, 2018 Definitive Rating Assigned A2 (sf)Issuer: Invitation Homes 2018-SFR4Cl. B, Upgraded to Aaa (sf); previously on Nov 8, 2018 Definitive Rating Assigned Aa2 (sf)Cl. C, Upgraded to Aa2 (sf); previously on Nov 8, 2018 Definitive Rating Assigned A2 (sf)RATINGS RATIONALEThe rating upgrades are driven by the steady build-up of equity in the properties backing these transactions and the operator's ability to maintain operating expense ratios below our original expectations. While delinquencies have increased since the start of the pandemic in March 2020, strong rental demand and the limited supply of single-family rental properties have increased contractual rents, thereby keeping the overall cashflow steady.Due to the strong housing market, these transactions have benefited from significant home price appreciation of 36%-45% since closing. In addition, Invitation Homes has voluntarily prepaid the loans, $193,200,000 of Invitation Homes 2018-SFR1 Trust and $243,800,000 of Invitation Homes 2018-SFR4 in the last 12 months. Realized home price growth and large amounts of voluntary prepayment have reduced Moody's LTV since closing, thereby increasing Moody's expected recovery values. Recovery values represent the funds expected to be generated by the liquidation of the underlying rental properties in the event that the issuer is unable to secure refinancing before the final maturity date and the certificates need to be repaid. We calculate the updated Moody's value by accounting for the home price appreciation applicable to each property since closing. The increase in property values is calculated based on home price appreciation at the metropolitan statistical area (MSA) level, based on data reported by Moody's Analytics.Today's action reflects the coronavirus pandemic's residual impact on the ongoing performance of residential mortgage loans as the US economy continues on the path toward normalization. Economic activity will continue to strengthen in 2021 because of several factors, including the rollout of vaccines, growing household consumption and an accommodative central bank policy. However, specific sectors and individual businesses will remain weakened by extended pandemic related restrictions.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Principal MethodologiesThe principal methodology used in these ratings was "Single-Family Rental Securitizations Methodology" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1214103. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Factors that would lead to an upgrade or downgrade of the ratings:UpLevels of credit protection that are higher than necessary to protect investors against current expectations of loss could drive the ratings of the subordinate bonds 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.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 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.Finally, performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. In addition, improvements in reporting formats and data availability across deals and trustees may provide better insight into certain performance metrics such as the level of collateral modifications.REGULATORY DISCLOSURESThe List of Affected Credit Ratings announced here are all solicited credit ratings. Additionally, the List of Affected Credit Ratings includes additional disclosures that vary with regard to some of the ratings. Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL460178 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items:• Rating Solicitation• Issuer Participation• Participation: Access to Management• Participation: Access to Internal Documents • Disclosure to Rated Entity • Endorsement • Lead Analyst • Releasing Office For 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.The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each 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.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.At least one ESG consideration was material to the credit rating action(s) announced and described above.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. 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