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KBRA Assigns Preliminary Ratings to FirstKey Homes 2021-SFR1Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to 12 classes of FirstKey Homes 2021-SFR1 (FKH 2021-SFR1) single-family rental pass-through certificates. FKH 2021-SFR1 is a single-family rental (SFR (News - Alert)) securitization that will be collateralized by a single $2.1 billion fixed-rate loan secured by mortgages on 9,238 income-producing single-family homes. The fixed-rate loan requires interest-only payments and have a five-year term. FKH 2021-SFR1 is the third securitization issued by FirstKey Homes and the second largest securitization issued in the SFR sector to date. The underlying properties are located in or near 39 Core Based Statistical Areas (CBSAs) across 16 states. The top-three CBSAs represent 31.2% of the portfolio and include Atlanta (15.8%), Miami (8.5%), and Charlotte (6.9%). The three largest state exposures represent 56.5% of the portfolio and consist of Florida (29.0%), Georgia (16.2%), and North Carolina (11.3%). The aggregate BPO value of the underlying homes is $2.3 billion yielding an LTV of 90.0%. KBRA adjusted the BPOs, which yielded an aggregate value of $2.2 billion. This represents a 5.0% haircut to the nominal BPO value. The resulting LTV based on KBRA's adjusted BPO value is 94.7%. The sponsor will have the right to release properties without prepaying the loan balance or paying yield maintenance or additional release premium to the trust. Exercise of the excess collateral release (ECR) feature is subject to satisfying certain terms and conditions, including but not limited to: obtaining updated BPOs for 100% of the collateral properties; the loan-to-value (LTV) ratio based on the updated BPOs cannot exceed 83.0% (excluding loan component I) for any ECR; the LTV for each loan component cannot exceed the LTV as of the closing date of the securitization; and certain performance tests must be met. Utilization of the feature is also subject to rating agency confirmation (RAC) from KBRA. KBRA utilized its U.S. Single-Family Rental Securitization Methodology to evaluate the transaction. The methodology leverages elements of KBRA's commercial mortgage-backed securities and residential mortgage-backed securities criteria due to the fact that the collateral underlying an SFR transaction has both 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. To determine loss given default, KBRA assumed the underlying collateral properties would be liquidated in the residential property market. Click here to view the report. To access ratings and relevant documents, click here. Related Publications
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 Information Disclosure Form(s) 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 Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com. About KBRA Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. 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.
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