DBRS Morningstar Finalizes Draft Ratings and Assigns New Rating to Mello Mortgage Capital Acceptance 2022-INV2

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DBRS, Inc. (DBRS Morningstar) has finalized the following interim ratings and assigned a new rating to the Mortgage Transfer Certificates, Series 2022-INV2 (the Certificates) issued by Mello Mortgage Capital Acceptance 2022-INV2 (MELLO 2022-INV2).

$390.2 million Class A-1 to AAA (fs)

$390.2 million Class A-1-A to AAA (fs)

$263.0 million Class A-2 to AAA (fs)

$263.0 million Class A-2-A to AAA (fs)

$375.8 million Class A-2-B to AAA (fs)

$310.0 million Class A-3 to AAA (fs)

$310.0 million Class A-3-A to AAA (fs)

$310.0 million Class A-3-B to AAA (fs)

$310.0 million Class A-3-X to AAA (fs)

$232.5 million Class A-4 to AAA (fs)

$232.5 million Class A-4-A to AAA (fs)

$232.5 million Class A-4-B to AAA (fs)

$232.5 million Class A-4-X to AAA (fs)

$77.5 million Class A-5 to AAA (fs)

$77.5 million Class A-5-A to AAA (fs)

$77.5 million Class A-5-X to AAA (fs)

$195.1 million Class A-6 to AAA (fs)

$195.1 million Class A-6-A to AAA (fs)

$195.1 million Class A-6-B to AAA (fs)

$195.1 million Class A-6-X to AAA (fs)

$114.9 million Class A-7 to AAA (fs)

$114.9 million Class A-7-A to AAA (fs)

$114.9 million Class A-7-X to AAA (fs)

$37.4 million Class A-8 to AAA (fs)

$37.4 million Class A-8-A to AAA (fs)

$37.4 million Class A-8-X to AAA (fs)

$23.9 million Class A-9 to AAA (fs)

$23.9 million Class A-9-A to AAA (fs)

$23.9 million Class A-9-X to AAA (fs)

$53.6 million Class A-10 to AAA (fs)

$53.6 million Class A-10-A to AAA (fs)

$53.6 million Class A-10-X to AAA (fs)

$65.8 million Class A-11 to AAA (fs)

$65.8 million Class A-11-X to AAA (fs)

$65.8 million Class A-11-A to AAA (fs)

$65.8 million Class A-11-AI to AAA (fs)

$65.8 million Class A-11-B to AAA (fs)

$65.8 million Class A-11-BI to AAA (fs)

$65.8 million Class A-11-C to AAA (fs)

$65.8 million Class A-12 to AAA (fs)

$65.8 million Class A-13 to AAA (fs)

$14.4 million Class A-14 to AAA (fs)

$14.4 million Class A-15 to AAA (fs)

$321.9 million Class A-16 to AAA (fs)

$68.3 million Class A-17 to AAA (fs)

$390.2 million Class AX-1 to AAA (fs)

$390.2 million Class AX-2 to AAA (fs)

$65.8 million Class AX-3 to AAA (fs)

$14.4 million Class AX-4 to AAA (fs)

$14.8 million Class B-1 to AA (sf)

$10.6 million Class B-2 to A (sf)

$10.8 million Class B-3 to BBB (sf)

$7.3 million Class B-4 to BB (sf)

$5.1 million Class B-5 to B (low) (sf)

Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-X, A-8-X, A-9-X, A-10-X, A -11-X, A-11-AI, A-11-BI, AX-1, AX-2, AX-3 and AX-4 are certificates of interest only. Class balances represent notional amounts.

Classes A-1, A-1-A, A-2, A-2-A, A-2-B, A-3, A-3-A, A-3-B, A-3-X, A -4, A-4-A, A-4-B, A-4-X, A-5, A-5-A, A-5-X, A-6, A-6-B, A-7 , A-7-A, A-7-X, A-8, A-9, A-10, A-11-A, A-11-AI, A-11-B, A-11-BI, A -11-C, A-12, A-13, A-14, A-16, A-17, AX-2 and AX-3 are exchangeable certificates. These classes can be exchanged for combinations of exchange certificates.

Classes A-2, A-2-A, A-2-B, A-3, A-3-A, A-3-B, A-4, A-4-A, A-4-B, A -5, A-5-A, A-6, A-6-A, A-6-B, A-7, A-7-A, A-8, A-8-A, A-9, A -9-A, A-10, A-10-A, A-11, A-11-A, A-11-B, A-11-C, A-12 and A-13 are super-senior certificates . These classes benefit from the additional protection of senior support certificates (Classes A-14 and A-15) in terms of loss allocation.

the AAA (sf) certificate ratings reflect 11.75% credit enhancement provided by subordinated certificates. AA (sf), A (sf), BBB (sf), BB (sf) and B (low) (sf) ratings reflect 8.40%, 6.00%, 3.55%, 1.90% and 0.75% credit enhancement, respectively.

Other than the categories specified above, DBRS Morningstar is not evaluating any other categories in this transaction.

This is a securitization of a portfolio of first-ranking conventional residential mortgage loans, at a fixed rate, financed by the issuance of the certificates. The certificates are backed by 1,094 loans with a total principal balance of approximately $442,105,486 on the deadline (1st of March2022).

MELLO 2022-INV2 is the sixth prime securitization comprised of fully amortized fixed rate mortgages on non-owner occupied residential investment properties issued under the MELLO shelf. The portfolio consists of conforming mortgages with an original term to maturity of primarily 30 years, which were underwritten by loanDepot using an automated underwriting system (AUS) designated by Fannie Mae Where Freddie Mac and were eligible for purchase by these agencies. About 5.3% of loans were subject to government-sponsored enterprise (GSE) assessment waivers. These loans did not require an appraisal of the new home, and the value of the property for the corresponding mortgage was based on an appraisal provided by the lender and accepted by Fannie Mae Where Freddie Mac’s AUS. In its analysis, DBRS Morningstar applied property value haircuts to these loans, which increased expected collateral losses. Details on underwriting conforming loans can be found in the Key Probability of Default Factors section.

loanDepot.comLLC (loanDepot) is the originator, seller and will act as servicer for the transaction. Computershare Trust Company, North America (computer sharing) is the lead manager and securities administrator of the Mortgages. Mello Credit Strategies LLC is the sponsor of the transaction. LD Group Holdings LLC will serve as surety with respect to Seller’s recourse obligations. Mello Securitization Depositor LLCa subsidiary of the Sponsor and an affiliate of the Seller, will act as Depositor of the transaction. Wilmington Savings Fund SocietyFSB will serve as trustee, and Deutsche Bank National Trust Company will serve as guardian.

For this transaction, the service fee consists of three separate components: the global base service fee, the global overdue service fee, and the global additional service fee. These fees vary depending on the delinquency status of the related loan and will be paid from interest earned prior to distribution to securities.

The transaction uses a variable interest senior-subordinate cash flow structure that is improved over a pre-crisis structure.

Impact of the coronavirus disease (COVID-19) pandemic

The coronavirus pandemic and resulting isolation measures caused an immediate economic contraction, leading to sharp increases in unemployment rates and reductions in income for many consumers. DBRS Morningstar saw an increase in defaults for many residential mortgage-backed (RMBS) asset classes soon after the pandemic began.

These mortgage delinquencies were primarily in the form of forbearances, typically short-term payment relief that can occur very differently from traditional delinquencies. At the start of the pandemic, the option to waive mortgage payments was widely available, and it drove forbearance to a very high level. After the dust settled, coronavirus-induced forbearance in 2020 performed better than expected, thanks to government aid, low loan-to-value ratios and good underwriting in the mortgage market in general. Across almost all RMBS asset classes, delinquencies have gradually declined in recent months as the forbearance period draws to a close for many borrowers.

For more information on rating methodologies and the coronavirus, please see the following commentary from DBRS Morningstar: Baseline Macroeconomic Scenarios For Rated Sovereigns – March 2022 Updated, dated March 24, 2022.

The ratings reflect transactional strengths which include high quality credit attributes, well qualified borrowers, structural improvements, satisfactory third party due diligence review and 100% outstanding loans.

The ratings reflect transactional weaknesses which include loans that are 100% of the investors’ properties and some borrowers with multiple mortgages in the securitized pool, certain aspects of the representations and warranties framework and the manager’s financial capabilities.

The full description of strengths, challenges and mitigating factors is detailed in the related evaluation report.

A description of how DBRS Morningstar considers ESG factors in the DBRS Morningstar Analytical Framework is available in DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/ research/373262.

Remarks:

All figures are in we dollars unless otherwise specified.

The main methodology is RMBS Insight 1.3: we Residential mortgage-backed securities model and scoring methodology (April 1, 2020), which can be found on dbrsmorningstar.com under Methodologies and Criteria.

DBRS Sovereign Morningstar group publishes reference macroeconomic scenarios for rated sovereigns. DBRS Morningstar’s analysis considered impacts consistent with baseline scenarios as set out in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to -credit-ratings.

The rated entity or its related entities participated in the rating process for this rating metric. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the relevant appendix for more information on the sensitivity of the assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking the link under Related Documents below or by contacting us at [email protected]

For more information about this credit or this industry, visit www.dbrsmorningstar.com or contact us at [email protected]

DBRS, Inc.

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New York, NY 10005 United States

Phone. +1 212 806-3277

Ratings

Date Issued	Debt Rated	Action	Rating	Trend	Attributesi

US = Lead Analyst based in the USA

CA = Lead Analyst based in Canada

EU = Lead Analyst based in EU

UK = Lead Analyst based in UK

E = EU approved

U= UK approved

Unsolicited participation with access

Unsolicited participation without access

Unsolicited Non Participating

31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-1	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-1-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-10	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-10-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-10-X	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-11	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-11-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-11-AI	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-11-B	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-11-BI	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-11-C	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-11-X	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-12	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-13	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-14	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-15	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-16	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-17	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-2	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-2-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-2-B	New Rating	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-3	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-3-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-3-B	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-3-X	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-4	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-4-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-4-B	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-4-X	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-5	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-5-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-5-X	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-6	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-6-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-6-B	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-6-X	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-7	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-7-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-7-X	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-8	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-8-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-8-X	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-9	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-9-A	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-9-X	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-X-1	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-X-2	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-X-3	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class A-X-4	Provis.-Final	AAA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class B-1	Provis.-Final	AA (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class B-2	Provis.-Final	A (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class B-3	Provis.-Final	BBB (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class B-4	Provis.-Final	BB (sf)	--	US
31-Mar-22	Mortgage Pass-Through Certificates, Series 2022-INV2, Class B-5	Provis.-Final	B (low) (sf)	--	US
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