Morgan Stanley residential mortgage trust wins provisional Morningstar DBRS ratings

Traders Union
All News
Financial News
Morgan Stanley mortgage trust ratings

Highlights

Morgan Stanley Residential Mortgage Loan Trust 2026-NQM7 received provisional Morningstar DBRS ratings up to (P) AAA (sf) on tranches totaling $560.1 million.
The $490.4 million mortgage pool comprises fixed- and adjustable-rate prime and nonprime first-lien loans, about four months seasoned, with 33.8% classified as non-QM.
NewRez LLC will service 58.3% of loans, United Wholesale Mortgage originated 15%, and 50.7% of the pool was made to investors for business purposes.

Provisional ratings and transaction structure

As reported by Morningstar DBRS, DBRS, Inc. assigned provisional credit ratings to the Mortgage Pass-Through Certificates, Series 2026-NQM7, to be issued by Morgan Stanley Residential Mortgage Loan Trust 2026-NQM7.

The ratings include (P) AAA (sf) on $140.0 million of Class A-1FCF, $46.7 million of Class A-1LCF, $186.7 million of Class A-1, $162.2 million of Class A-1-A and $24.5 million of Class A-1-B. Morningstar DBRS also assigned (P) AA (sf) to $33.3 million of Class A-2, (P) A (low) (sf) to $43.4 million of Class A-3, (P) BBB (low) (sf) to $14.7 million of Class M-1, (P) BB (low) (sf) to $8.1 million of Class B-1 and (P) B (sf) to $9.3 million of Class B-2.

Class A-1 is structured as an exchangeable certificate, while Classes A-1-A and A-1-B are exchange certificates that can be swapped in combinations set out in the offering documents. The top provisional ratings reflect 23.85% credit enhancement from subordinated certificates, while the lower-rated tranches reflect enhancement levels ranging from 17.05% down to 1.65%.

Loan pool composition and servicing exposure

The securitization is backed by a portfolio of fixed- and adjustable-rate prime and nonprime first-lien residential mortgages with an aggregate principal balance of about $490.4 million. The pool is about four months seasoned on average, with loan ages ranging from one to 15 months.

United Wholesale Mortgage originated about 15.0% of the loans, followed by HomeXpress Mortgage at 14.3%, Loan Funder LLC at 11.7% and NQM Funding LLC at 10.4%. All remaining originators each account for less than 10% of the mortgage pool.

NewRez LLC, operating as Shellpoint, will service 58.3% of the loans, Selene Finance LP will service 28.5%, and Select Portfolio Servicing, Inc. will service 13.3%. Rocket Mortgage LLC is set to act as master servicer, Citibank N.A. will serve as trustee, securities administrator and certificate registrar, and Computershare Trust Company, N.A. will act as custodian.

Morningstar DBRS said 33.8% of the loans by balance are classified as non-QM under Consumer Financial Protection Bureau rules, while 50.7% were made to investors for business purposes and are exempt from Ability-to-Repay and Qualified Mortgage requirements. Another 15.1% of the pool is designated QM Safe Harbor and 0.4% is classified as QM Rebuttable Presumption by unpaid principal balance.

Our earlier article on KBRA’s preliminary ratings for the RRE 31 Loan Management DAC deal outlined a new euro-denominated cash flow CLO targeting a €400 million portfolio backed by 143 corporate obligors. We noted how the initial credit enhancement and coverage tests—including par value and interest coverage measures, excess spread, and reinvestment overcollateralisation—supported the proposed note ratings, while highlighting Redding Ridge’s role as collateral manager and its broader European CLO platform.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.