Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to six
classes of Colony American Homes 2014-2 (CAH 2014-2) single-family
rental (SFR) pass-through certificates.
CAH 2014-2 is a SFR securitization that will be collateralized by a
$797.9 million loan secured by mortgages on 3,727 income-producing
single-family homes. This is Colony American Homes' second
securitization. The loan backing the securitization will be a
non-recourse, first lien, floating rate mortgage loan originated by
JPMorgan Chase Bank, N.A. on the securitization closing date and funded
with proceeds of the sale of the certificates. The floating rate loan
will require interest only payments and have a two-year term with three
12-month extension options. The underlying properties are one to four
unit residential properties located in seven states, with the top three
representing 73% of the portfolio (California (33.0%), Florida (27.2%),
and Georgia (12.6%).
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: Colony
American Homes 2014-2 Pre-Sale Report.
Colony American Homes 2014-2 (CAH 2014-2) Preliminary Ratings
About Kroll Bond Rating Agency
KBRA is registered with the U.S. Securities and Exchange Commission as a
Nationally Recognized Statistical Rating Organization (NRSRO). In
addition, KBRA is recognized by the National Association of Insurance
Commissioners (NAIC) as a Credit Rating Provider (CRP).
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