DBRS Confirms Ratings on Canada Mortgage Acceptance Corporation, Series 2006-C5

DBRS has today confirmed the ratings on the Series 2006-C5 Certificates (the Certificates, as outlined below) issued by Canada Mortgage Acceptance Corporation.

The Certificates have been confirmed based on the following factors, as the Class A-2 Certificates were not fully repaid on their Targeted Final Distribution Date (which is today) and, consequently, the amortization period contemplated in the transaction documentation has commenced.

(1) The ratings assigned by DBRS reflect the creditworthiness of the underlying assets and address the likelihood that Certificateholders will receive timely repayment of principal and interest on or prior to the Scheduled Final Distribution Date of September 15, 2011, not on the respective Targeted Final Distribution Dates of the Certificates. Failure to pay any class of Certificates on its Targeted Final Distribution Date does not constitute an Event of Default in respect of the Certificates and only results in the beginning of an amortization period (see Point (2) below).

(2) During each month of the amortization period, the principal amount collected from the underlying mortgages will be used to pay down the Class A-2 Certificates and VFC-2 Certificate pro rata until the outstanding balances are reduced to zero, or until the Scheduled Final Distribution Dates. The subordinated Certificates will not receive any principal repayment until the Class A-2 and VFC-2 Certificates have been fully repaid, after which the subordinated Certificates will be repaid sequentially. Since closing on November 29, 2006, approximately 50% of the loan balance has been repaid, indicating an estimated prepayment rate of approximately 25% per year. In the unlikely scenario whereby no further prepayments were to be received, the mortgage borrowers are still obligated to repay the outstanding loan balance at the end of the mortgage term (balloon payment), according to the terms of the mortgages. There is no assurance that borrowers will be successful in obtaining a new mortgage to repay the balloon payment; however, it is viewed as unlikely that a borrower who has been making mortgage payments for five years without default would not be able to obtain a new mortgage when refinancing is required (albeit possibly at a higher mortgage rate). In addition, DBRS’s modelling assumption has taken such refinancing risk of balloon payment into consideration when assessing the required credit enhancement at closing.

(3) While excess spread is not available to support non-Interest Only (IO) Certificates due to the existence of two classes of IO Certificates, the levels of structural enhancement for each rating class have increased since closing, as a result of the repayment of the Class A-1 and VFC-1 Certificates and the non-amortizing nature of the subordinate Certificates. As of March 31, 2009, 21.1% subordination was available to the Class A-2 and VFC-2 Certificates, 13.9% to Class B, 8.6% to Class C, 4.9% to Class D, 2.8% to Class E and 2.0% to Class F, compared with cumulative losses of 0.39% (see point (4) below). The subordination for the aforementioned classes has increased from 11.0%, 7.4%, 4.7%, 2.9%, 1.8% and 1.4% at closing, respectively. The subordination will continue to increase as the remaining Class A-2 and VFC-2 Certificates are paid down monthly.

(4) The underlying collateral continues to perform well, incurring low cumulative losses of 0.39% (or $2.03 million) as of March 31, 2009. When a loss occurs, it happens in a reverse sequential order and begins with the lowest-ranked unrated Certificates, namely, Class G. The lowest-rated Class F Notes will not be fully repaid if the cumulative loss were greater than the entire amount of Class G ($7.28 million). Absent a catastrophic economic change or precipitous market downturn, the cumulative loss over the remaining life of the transaction is not expected to be higher than the remaining Class G amount, nor is it expected to result in a loss to the Certificateholders of any rated class of the Certificates.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Canadian RMBS Methodology, which can be found on our website under Methodologies.

This is a Structured Finance rating.

MEDIA CONTACT

Caroline Creighton
Senior Vice President
Communications
+1 416 597 7317
ccreighton@dbrs.com