CAH 2014-2 is a SFR securitization that will be collateralized by a
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:
|Class||Rating||Initial Class Balance|
|Class C||A (sf)|
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