KBRA Assigns Preliminary Ratings to Arroyo Mortgage Trust 2019-2 (ARRW 2019-2)

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency, Inc. (KBRA) assigns preliminary ratings to six
classes of mortgage-backed notes from Arroyo Mortgage Trust 2019-2 (ARRW
2019-2), a $960.0 million non-prime RMBS transaction.

ARRW 2019-2 is sponsored by Arroyo Mortgage Acquisition Company III LLC
(AMAC III), an affiliate of Western Asset Mortgage Capital Corporation
(WMC). The ARRW 2019-2 pool, comprising 2,316 residential mortgages,
includes both seasoned performing and newly-originated non-prime
collateral with a weighted average (WA) loan age of approximately 16
months (based on May 1, 2019 cut-off). The loans were underwritten
primarily using non-traditional income documentation sources to
borrowers with substantial equity. The pool contains both non-qualified
mortgages (Non-QM; 65.6%) and loans that are exempt from the ATR rule
(34.4%), including business purpose investor property loans and
mortgages originated prior to implementation of the Ability-to Repay
rule.

The underlying ARRW 2019-2 collateral consists of both hybrid
adjustable-rate mortgages (80.9%) and fixed-rate mortgages (19.1%), with
2.9% of the loans possessing an interest-only period. Borrowers in the
pool possess a WA original credit score of 744 and they exhibit
substantial equity in each mortgaged property, with WA original
loan-to-value (LTV) and combined LTV (CLTV) ratios of 61.6% and 61.7%,
respectively.

KBRA’s rating approach incorporated loan-level analysis of the mortgage
pool through its Residential Mortgage Default and Loss Model, an
examination of the results from third-party loan file due diligence,
cash flow modeling, analysis of the transaction’s payment structure,
reviews of key transaction parties and an assessment of the
transaction’s legal structure and documentation. This analysis is
further described in our U.S. RMBS Rating Methodology.

To access ratings, reports and disclosures, click here.

Related Publications: (available at www.kbra.com)

— ARRW
2019-2 Pre-Sale Report

— ARRW
2019-2 Tear Sheet

— U.S.
RMBS Rating Methodology

— Residential
Mortgage Default and Loss Model

— U.S.
RMBS Rating Methodology for Assessing Non-QM Risk

— KBRA
Expects TRID to Have Limited Impact on RMBS Enhancement Levels

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. 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) by the European Securities and
Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is
registered with ESMA as a CRA.

Contacts

Analytical Contacts:
Patrick
Gervais, Senior Director
(646) 731-2426
pgervais@kbra.com

Sharif Mahdavian, Senior Director
(646) 731-2301
smahdavian@kbra.com

Fei Han, Analyst
(646) 731-2342
fhan@kbra.com

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