KBRA publishes and assigns a BBB- issuer rating to GITSIT Solutions, LLC ("GITSIT" or "the company"). KBRA also publishes and assigns a Senior Secured Debt rating of BBB to GITSIT. On October 1, 2024, these ratings were assigned on an unpublished basis. The rating Outlook is Stable.

GITSIT’s ratings are supported by its solid operating performance over the course of its 17-year history (predecessor included), its highly experienced management team, and a conservative financial profile as it relates to capital management, leverage, and disciplined growth. GITSIT has demonstrated expertise in its chosen business of acquiring, rehabilitating, and selling distressed mortgage loans, having completed ~35,000 transactions since 2007 with an average loan-level return of 21%. Such returns support our belief that the company is both a disciplined pricer of risk as well as a skilled NPL servicer. With respect to the company’s financial profile, GITSIT is (and is expected to remain), by management’s purposeful design, a lowly levered institution, with $186 million of common equity supporting a balance sheet of $406 million as of 2Q24. This conservative capital profile (equity to assets ratio of 46%) is an appropriate one given a portfolio that is comprised mainly of “level 3” assets.

Given the company’s comparatively smaller balance sheet, GITSIT’s competitive positioning and market share is, at first glance, rather inconsequential in the context of a ~$14 trillion mortgage market that includes ~$225 billion in 90+ day delinquent mortgage debt. However, KBRA believes the company’s size affords it competitive advantages vs. larger peers. Importantly, the company’s size allows it to source and bid on NPL pools that are otherwise too small to draw the attention of larger institutions, thereby granting GITSIT stronger pricing power as it relates to loan acquisition (which, all else equal, contributes to stronger returns and more protection against asset level credit deterioration from GITSIT’s perspective). As such, we view the company’s preferred scale and industry positioning as favorable ratings dynamics to a degree, and appreciate that growth for the simple sake of attaining market share (which would likely coincide with a more levered financial profile), could potentially propel the company into a more competitive operating environment against significantly larger, institutional peers and dilute some of the advantages the company has with its high touch, focused servicing operations. A key differentiator of the company compared to its peers, in our opinion, is the speed in which it has historically achieved resolutions on acquired NPLs. With the average loan held in GITSIT’s portfolio resolved in 11.8 months (compared to competitors' timeline of 2+ years), the low hold time reduces interest rate, credit, and regulatory risk posed to the company.

KBRA incorporates one notch of ratings uplift from the company’s issuer rating of BBB- to arrive at a Senior Secured Debt rating of BBB. The primary factor in our adjustment is the substantial implied equity of the assets collateralizing the expected senior secured notes offering. The notes are expected to be collateralized by ~300 predominantly first lien residential mortgage loans with a weighted average LTV of approximately 35%. The loans collateralizing the debt are to properties with an underlying value of $85 million, which implies a rather strong asset coverage ratio of 2.5x - 3.0x, depending on the finalized size of the issuance. We believe the implied levels of equity in the assets and the overcollateralization of the notes suggest a one notch higher rating for GITSIT’s Senior Secured Debt compared to its issuer rating.

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Methodologies

• Financial Institutions: Finance Company Global Rating Methodology
• Corporates & Financial Institutions: Corporate Instruments / Corporate-Linked Obligations Notching Global Methodology
• ESG Global Rating Methodology

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. 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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