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KBRA Assigns Preliminary Ratings to NRZ MSR-Collateralized Notes, Series 2020-FNT1

Kroll Bond Rating Agency (KBRA) assigns a rating of ‘BBB- (sf)’ to the Series 2020-FNT1 Term Notes from NRZ MSR-Collateralized Notes, New Residential Mortgage LLC (NRM) and NRZ FNT Excess LLC’s issuance pursuant to a Master Credit Agreement backed by mortgage servicing rights (MSRs) including servicing fees, aggregate excess spread and float pledged by the issuers to the Collateral Agent in support of the issuers’ payment obligations. The MSRs are related to Fannie Mae-owned mortgage loans that are serviced by NRM pursuant to a servicing agreement between NRM and Fannie Mae.

KBRA’s rating on the Series 2020-FNT1 Term Notes is primarily dependent on the credit rating of NRZ (KBRA Rating: BB+/Negative) as Guarantor in support of the Issuers’ payment obligations and rights to MSRs granted by Fannie Mae to the Issuers, with certain transaction features described more fully in KBRA’s presale report providing one notch uplift on the rating of the notes. Generally, these transaction features are factors that KBRA believes reduce the risk of servicer termination by Fannie Mae which include but are not limited to (i) the pre-existing relationship between Fannie Mae, the Servicer and Subservicers, (ii) a tri-party acknowledgement agreement which includes NRM, Fannie Mae, and the Collateral Agent (iii) collateral coverage triggers to pay down notes or add collateral as applicable, and (iv) the diversity of subservicers available to undertake direct servicing responsibilities.

KBRA’s rating approach for the rated notes utilized its Global Finance Company Rating Methodology (November 28, 2017) and also relied on its Global Structured Finance Counterparty Methodology (August 8, 2018).

KBRA’s Finance Company methodology incorporates an analysis of both business and financial factors in determining ratings. Some of the business factors include (1) Market Share, Branding and Viability, (2) Risk Management, and (3) Economic and Operational risks. Some financial factors include (1) Profitability (2) Liquidity and Funding (3) Leverage and Capital Adequacy and (4) Asset Quality.

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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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Contacts

Analytical Contacts

Sharif Mahdavian, Managing Director (Lead Analyst)
+1 (646) 731-2301
smahdavian@kbra.com

Ian Jaffe, Managing Director
+1 (646) 731-3302
ijaffe@kbra.com

Jack Kahan, Senior Managing Director
+1 (646) 731-2486
jkahan@kbra.com

Joe Scott, Managing Director (Rating Committee Chair)
+1 (646) 731-2438
jscott@kbra.com

Business Development Contact

Nish Kumar, Senior Director
+1 (646) 731-3372
nkumar@kbra.com