KBRA assigns preliminary ratings to major CMBS transaction

In New York, Kroll Bond Rating Agency (KBRA) assigned preliminary ratings to various classes of mortgage-backed notes as part of the OBX 2024-NQM18 Trust. This transaction is valued at $479.7 million and is categorized as non-prime residential mortgage-backed securities (RMBS). The underlying collateral consists of 841 residential mortgages with a significant concentration of alternative income documentation loans, which account for almost 85% of the pool. Notably, over half of the loans are identified as non-qualified mortgages, while a substantial portion is exempt from the Ability-to-Repay/Qualified Mortgage rule due to their origination for non-consumer purposes. This aspect indicates a notable risk profile for the pooled mortgage loans, requiring careful evaluation by potential investors. KBRA's rating approach for this transaction employs rigorous analytical techniques, including a loan-level analysis through its proprietary Residential Asset Loss Model (REALM). Additionally, various methodologies and assessments, such as third-party loan file due diligence and cash flow modeling analysis, contributed to the overall evaluation of the collateral pool. Key transaction participants were also reviewed, ensuring that comprehensive insights were gathered about the transaction's legal structure and documentation. The firm further emphasizes the qualities of its assessment method in its U.S. RMBS Rating Methodology, which aims to provide transparency and clarity to investors. As part of the disclosures, KBRA mentions that further details on credit considerations, including how different factors could influence the credit rating's potential upgrades or downgrades, are available in the full rating report. In a related development, KBRA also assigned preliminary ratings to 15 classes of another transaction, the BBCMS 2024-5C31, valued at $872.5 million and backed by commercial mortgage loans secured by multiple properties. These activities underline KBRA’s ongoing efforts to provide reliable credit ratings and contribute to the broader financial landscape, as investors closely monitor the developments and risk profiles associated with mortgage-backed securities and their corresponding ratings.