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Rating Action: Moody's assigns definitive ratings to Prime RMBS issued by RATE Mortgage Trust 2021-HB1Global Credit Research - 14 Dec 2021New York, December 14, 2021 -- Moody's Investors Service ("Moody's") has assigned definitive ratings to 82 classes of residential mortgage-backed securities (RMBS) issued by RATE Mortgage Trust (RATE) 2021-HB1. The ratings range from Aaa (sf) to B3 (sf).RATE 2021-HB1 is the first agency-eligible high balance issue and fifth issue overall from Guaranteed Rate, Inc. (Guaranteed Rate or GRI), the sponsor of the transaction.The transaction is a prime RMBS securitization of predominantly 30-year, fixed rate agency-eligible high balance mortgage loans with an aggregate stated principal balance of $382,880,138. All the loans in the pool are originated by Guaranteed Rate and are designated as Qualified Mortgages (QM) either under the QM safe harbor or the GSE temporary exemption under the Ability-to-Repay (ATR) rules. Borrowers of the mortgage loans backing this transaction have strong credit profiles demonstrated by strong credit scores and low loan-to-value (LTV) ratios. No borrower under any mortgage loan is currently in an active COVID-19 related forbearance plan with the servicer. All mortgage loans are current as of the cut-off date.Similar to the RATE 2021-J3 transaction we have rated, RATE 2021-HB1 contains a structural deal mechanism according to which the servicing administrator will not advance principal and interest (P&I) to mortgage loans that are 120 days or more delinquent. Here, the servicing administrator will be responsible for funding any advance of delinquent monthly payments of principal and interest due but not received by the servicer on the mortgage loans. The sponsor and the servicing administrator are the same party, GRI.One TPR firm verified the accuracy of the loan level information that we received from the sponsor. This firm conducted detailed credit, property valuation, data accuracy and compliance reviews on 205 (37.3% by loan count) mortgage loans in the final collateral pool. ServiceMac, LLC (ServiceMac) will service all of the mortgage loans as of the cut-off Date. Computershare Trust Company, N.A. (CTCNA) will be the master servicer. We consider the presence of a strong master servicer to be a mitigant against the risk of any servicing disruptions.The transaction has a shifting interest structure with a five-year lockout period that benefits from a senior subordination floor and a subordinate floor. We coded the cash flow for each of the certificate classes using Moody's proprietary cash flow tool.We analyzed the underlying mortgage loans using Moody's Individual Loan Analysis (MILAN) model.The complete rating actions are as follows:Issuer: RATE Mortgage Trust 2021-HB1Cl. A-1, Definitive Rating Assigned Aaa (sf)Cl. A-2, Definitive Rating Assigned Aaa (sf)Cl. A-3, Definitive Rating Assigned Aaa (sf)Cl. A-4, Definitive Rating Assigned Aaa (sf)Cl. A-5, Definitive Rating Assigned Aaa (sf)Cl. A-6, Definitive Rating Assigned Aaa (sf)Cl. A-7, Definitive Rating Assigned Aaa (sf)Cl. A-8, Definitive Rating Assigned Aaa (sf)Cl. A-9, Definitive Rating Assigned Aaa (sf)Cl. A-10, Definitive Rating Assigned Aaa (sf)Cl. A-11, Definitive Rating Assigned Aaa (sf)Cl. A-12, Definitive Rating Assigned Aaa (sf)Cl. A-13, Definitive Rating Assigned Aaa (sf)Cl. A-14, Definitive Rating Assigned Aaa (sf)Cl. A-15, Definitive Rating Assigned Aaa (sf)Cl. A-16, Definitive Rating Assigned Aaa (sf)Cl. A-17, Definitive Rating Assigned Aaa (sf)Cl. A-18, Definitive Rating Assigned Aaa (sf)Cl. A-19, Definitive Rating Assigned Aaa (sf)Cl. A-20, Definitive Rating Assigned Aaa (sf)Cl. A-21, Definitive Rating Assigned Aaa (sf)Cl. A-22, Definitive Rating Assigned Aaa (sf)Cl. A-23, Definitive Rating Assigned Aaa (sf)Cl. A-24, Definitive Rating Assigned Aaa (sf)Cl. A-25, Definitive Rating Assigned Aaa (sf)Cl. A-26, Definitive Rating Assigned Aaa (sf)Cl. A-27, Definitive Rating Assigned Aaa (sf)Cl. A-28, Definitive Rating Assigned Aaa (sf)Cl. A-29, Definitive Rating Assigned Aaa (sf)Cl. A-30, Definitive Rating Assigned Aaa (sf)Cl. A-31, Definitive Rating Assigned Aa1 (sf)Cl. A-32, Definitive Rating Assigned Aa1 (sf)Cl. A-33, Definitive Rating Assigned Aa1 (sf)Cl. A-34, Definitive Rating Assigned Aa1 (sf)Cl. A-35, Definitive Rating Assigned Aa1 (sf)Cl. A-36, Definitive Rating Assigned Aa1 (sf)Cl. A-X-1*, Definitive Rating Assigned Aa1 (sf)Cl. A-X-2*, Definitive Rating Assigned Aaa (sf)Cl. A-X-3*, Definitive Rating Assigned Aaa (sf)Cl. A-X-4*, Definitive Rating Assigned Aaa (sf)Cl. A-X-5*, Definitive Rating Assigned Aaa (sf)Cl. A-X-6*, Definitive Rating Assigned Aaa (sf)Cl. A-X-7*, Definitive Rating Assigned Aaa (sf)Cl. A-X-8*, Definitive Rating Assigned Aaa (sf)Cl. A-X-9*, Definitive Rating Assigned Aaa (sf)Cl. A-X-10*, Definitive Rating Assigned Aaa (sf)Cl. A-X-11*, Definitive Rating Assigned Aaa (sf)Cl. A-X-12*, Definitive Rating Assigned Aaa (sf)Cl. A-X-13*, Definitive Rating Assigned Aaa (sf)Cl. A-X-14*, Definitive Rating Assigned Aaa (sf)Cl. A-X-15*, Definitive Rating Assigned Aaa (sf)Cl. A-X-16*, Definitive Rating Assigned Aaa (sf)Cl. A-X-17*, Definitive Rating Assigned Aaa (sf)Cl. A-X-18*, Definitive Rating Assigned Aaa (sf)Cl. A-X-19*, Definitive Rating Assigned Aaa (sf)Cl. A-X-20*, Definitive Rating Assigned Aaa (sf)Cl. A-X-21*, Definitive Rating Assigned Aaa (sf)Cl. A-X-22*, Definitive Rating Assigned Aaa (sf)Cl. A-X-23*, Definitive Rating Assigned Aaa (sf)Cl. A-X-24*, Definitive Rating Assigned Aaa (sf)Cl. A-X-25*, Definitive Rating Assigned Aaa (sf)Cl. A-X-26*, Definitive Rating Assigned Aaa (sf)Cl. A-X-27*, Definitive Rating Assigned Aaa (sf)Cl. A-X-28*, Definitive Rating Assigned Aaa (sf)Cl. A-X-29*, Definitive Rating Assigned Aaa (sf)Cl. A-X-30*, Definitive Rating Assigned Aaa (sf)Cl. A-X-31*, Definitive Rating Assigned Aaa (sf)Cl. A-X-32*, Definitive Rating Assigned Aa1 (sf)Cl. A-X-33*, Definitive Rating Assigned Aa1 (sf)Cl. A-X-34*, Definitive Rating Assigned Aa1 (sf)Cl. A-X-35*, Definitive Rating Assigned Aa1 (sf)Cl. A-X-36*, Definitive Rating Assigned Aa1 (sf)Cl. A-X-37*, Definitive Rating Assigned Aa1 (sf)Cl. B-1, Definitive Rating Assigned Aa3 (sf)Cl. B-1A, Definitive Rating Assigned Aa3 (sf)Cl. B-X-1*, Definitive Rating Assigned Aa3 (sf)Cl. B-2, Definitive Rating Assigned A3 (sf)Cl. B-2A, Definitive Rating Assigned A3 (sf)Cl. B-X-2*, Definitive Rating Assigned A3 (sf)Cl. B-3, Definitive Rating Assigned Baa3 (sf)Cl. B-4, Definitive Rating Assigned Ba3 (sf)Cl. B-5, Definitive Rating Assigned B3 (sf)*Reflects Interest-Only ClassesRATINGS RATIONALESummary Credit Analysis and Rating RationaleMoody's expected loss for this pool in a baseline scenario-mean is 0.36%, in a baseline scenario-median is 0.17% and reaches 5.07% at a stress level consistent with our Aaa ratings.We base our ratings on the certificates on the credit quality of the mortgage loans, the structural features of the transaction, our assessments of the origination quality and servicing arrangement, the strength of the TPR and the representations and warranties (R&W) framework, and the transaction's legal structure and documentation.Collateral DescriptionIn general, the borrowers have high FICO scores, high income, significant liquid assets and a stable employment history, all of which have been verified as part of the underwriting process and for loans in the due diligence sample, reviewed by the TPR firm. All the loans were originated through the retail channel. The borrowers have a high weighted average total monthly income of $18,813, significant weighted average liquid cash reserves of $155,074 (approximately 41.2% of the pool has more than 24 months of mortgage payments in reserve), and sizeable equity in their properties (weighted average LTV of 66.9%, CLTV of 67.2%). The pool has approximately 1.4 months of seasoning as of November 1, 2021, and all loans are contractually current as of the cut-off date. All of the mortgage loans in RATE 2021-HB1 are qualified mortgages (QM) meeting the requirements of the safe harbor provision under the QM safe harbor (per the original (old) QM rule) or the GSE temporary exemption under the Ability-to-Repay (ATR) rules.Origination QualityGuaranteed Rate has originated 100% of the loan pool. We consider Guaranteed Rate to be an acceptable originator of agency-eligible loans following a detailed review of its underwriting guidelines, quality control processes, policies and procedures, technology infrastructure, disaster recovery plan, and historical performance information relative to its peers. Therefore, we did not apply a separate adjustment for origination quality.Founded in 2000 by Victor Ciardelli, Guaranteed Rate is the largest non-bank jumbo mortgage originator in the U.S. and 3rd largest retail originator overall (as of Q1 2021). Headquartered in Chicago, the company has approximately 350+ branch offices across the U.S. and is licensed in all 50 states and Washington, D.C. The company employs over 6,500 employees nationwide. In 2020 Guaranteed Rate funded nearly $74B in total loan volume ($9B from jumbo loans), up 100% from 2019. The company invests heavily in technology. Guaranteed Rate originates primarily through its retail channels and focuses primarily on purchase, agency-eligible loans. The company is an approved Ginnie Mae, Fannie Mae, and Freddie Mac lender.Servicing ArrangementWe consider the overall servicing arrangement for this pool to be adequate. ServiceMac has the necessary processes, staff, technology and overall infrastructure in place to effectively service a transaction. CTCNA is responsible for servicer oversight, the termination of servicers and the appointment of successor servicers in its role as a master servicer. We did not make any adjustments to our base case and Aaa stress loss assumptions based on the servicing arrangement.Third-Party ReviewOne independent TPR firm was engaged to conduct due diligence for the credit, regulatory compliance, property valuation, and data accuracy on 205 loans in the final collateral pool (37.3% by loan count). The due diligence results confirm compliance with the originator's underwriting guidelines, no material regulatory compliance issues, and no material property valuation issues. The TPR identified all loans as level A grades and no level B, level C or level D grades in its review. However, the sample size does not meet our credit neutral criteria, therefore, we made an adjustment to loss levels to account for this risk.Representations & WarrantiesWe evaluate the R&W framework based on three factors: (a) the financial strength of the remedy provider; (b) the strength of the R&Ws (including qualifiers and sunsets) and (c) the effectiveness of the enforcement mechanisms. We evaluated the impact of these factors collectively on the ratings in conjunction with the transaction's specific details and in some cases, the strengths of some of the factors can mitigate weaknesses in others. We also considered the R&W framework in conjunction with other transaction features, such as the independent due diligence, custodial receipt, and property valuations, as well as any sponsor alignment of interest, to evaluate the overall exposure to loan defects and inaccurate information. Overall, we consider the R&W framework for this transaction to be adequate, generally consistent with that of other prime transactions which we rated. However, we applied an adjustment to our losses to account for the risk that the R&W provider (unrated) may be unable to repurchase defective loans in a stressed economic environment.Transaction StructureRATE 2021-HB1 has one pool with a shifting interest structure that benefits from a subordination floor. Funds collected, including principal, are first used to make interest payments and then principal payments to the senior bonds, and then interest and principal payments to each subordinate bond. As in all transactions with shifting interest structures, the senior bonds benefit from a cash flow waterfall that allocates all prepayments to the senior bond for a specified period of time and increasing amounts of prepayments to the subordinate bonds thereafter, but only if loan performance satisfies delinquency and loss tests.Similar to the RATE 2021-J3 transaction we have rated, RATE 2021-HB1 contains a structural deal mechanism according to which the servicing administrator will not advance principal and interest to loans that are 120 days or more delinquent. Although this feature lowers the risk of high advances that may negatively affect the recoveries on liquidated loans, the reduction in interest distribution amount is credit negative to the subordinate certificates.The balance and the interest accrued on these "Stop Advance Mortgage Loans (SAML)" will be removed from the calculation of the principal and interest distribution amounts with respect to the seniors and subordinate bonds. The interest distribution amount will be reduced by the interest accrued on the SAML loans. This reduction will be allocated first to the subordinate certificates and then to the senior certificates in the reverse order of payment priority. In the case of the senior certificates, such reduction in distribution amounts, are allocated (i) first to the senior support (including the linked interest-only classes) and (ii) then to the super senior classes (including the linked interest-only classes), on a pro rata basis.Once a SAML is liquidated, the net recovery from that loan's liquidation is included in available funds and thus follows the transaction's priority of payment. However, the reimbursement of stop advance shortfalls happens only after liquidation or curing of SAML. As a result, higher delinquencies could lead to higher shortfalls especially for the subordinate bonds as compared to a transaction without the stop advance feature.While the transaction is backed by collateral with strong credit characteristics, we considered scenarios in which the delinquency pipeline rises, and results in higher shortfalls for the certificates outstanding. In our analysis, we have considered the additional interest shortfall that the certificates may incur due to the transaction's stop-advance feature.Tail Risk & Subordination FloorThe transaction cash flows follow a shifting interest structure that allows subordinated bonds to receive principal payments under certain defined scenarios. Because a shifting interest structure allows subordinated bonds to pay down over time as the loan pool balance declines, senior bonds are exposed to eroding credit enhancement over time, and increased performance volatility as a result. To mitigate this risk, the transaction provides for a senior subordination floor of 0.80% of the cut-off date pool balance, and as subordination lockout amount of 0.80% of the cut-off date pool balance. The floors are consistent with the credit neutral floors for the assigned ratings according to our methodology.Factors that would lead to an upgrade or downgrade of the ratings:DownLevels of credit protection that are insufficient to protect investors against current expectations of loss could drive the ratings down. Losses could rise above Moody's original expectations as a result of a higher number of obligor defaults or deterioration in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance and fraud.UpLevels of credit protection that are higher than necessary to protect investors against current expectations of loss could drive the ratings up. Losses could decline from Moody's original expectations as a result of a lower number of obligor defaults or appreciation in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market.MethodologyThe principal methodology used in rating all classes except interest-only classes was "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1271478. The methodologies used in rating interest-only classes were "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1271478 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies. Please note that a Request for Comment was published in which Moody's requested market feedback on potential revisions to one or more of the methodologies used in determining these Credit Ratings. If the revised methodologies are implemented as proposed, it is not currently expected that the Credit Ratings referenced in this press release will be affected. Request for Comments can be found on the rating methodologies page on www.moodys.comREGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1313185.The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Siddharth Lal Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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