DBRS Rates Vericrest Opportunity Loan Trust 2010-NPL1, Mortgage-Backed Notes, Series 2010-NPL1

DBRS has today assigned the following ratings to the Mortgage-Backed Notes, Series 2010-NPL1 issued by Vericrest Opportunity Loan Trust 2010-NPL1 (the Trust).

-- $35.6 million Class A rated at AA (low)
-- $33.8 million Class M rated at BBB (low)

The AA (low) on the Class A Notes reflect 90.0% of credit enhancement provided by subordinate classes and overcollateralization. The BBB (low) on the Class M notes reflect 80.5% of credit enhancement. Additionally a reserve fund has been established for the benefit of the holders of the Class A and M notes to cover nine months of current interest, servicing and trustee fees. The ratings on the notes also reflect the quality of the underlying assets and the capabilities of Vericrest Financial, Inc. (Vericrest) as servicer. Wells Fargo Bank, N.A. will serve as trustee and The Bank of New York Mellon Trust Company, N.A. will serve as custodian.

The Class B-1 and B-2 notes are not rated by DBRS.

Available funds that include interest and principal payments collected from the mortgage loans as well as liquidation proceeds from the sale of mortgaged properties will generally be distributed on the 25th of each month commencing in June 2010. Interest payments including any cap carryover amounts will be paid to the notes in their order of seniority. Principal will also be paid sequentially by seniority. The Class B-1 and B-2 are accrual notes and their interest payment amounts, to the extent there are available funds, will be paid as principal to the Class A and M notes (and to B-1 in the case of the Class B-2 notes) sequentially by seniority.

The Trust as of the cut-off date contains approximately 59% non-performing mortgage loans, 28% performing mortgage loans and 13% of REO properties. The performing loans are contractually current in payment as per the MBA method as of the cut-off date, but most of them have derogatory pay histories in the past. DBRS has categorized any mortgage loan that is not contractually current as of the cut-off date as non-performing. However, a portion of the non-performing loans in the trust have made at least one of the prior three monthly payments. The mortgage loans are on average 55 months seasoned, first-lien, fixed and adjustable rate mortgages secured by one- to four-family residential properties. As of the cut-off date, the mortgage loans had an approximate updated average CLTV of 148% and an approximate updated average FICO score of 553. Additionally, 51% of the mortgage loans have been modified. In its analysis, DBRS reviewed all modified loans in conjunction with modification dates and pay histories. To the extent that a modified loan has not demonstrated a consistently improved payment pattern for a minimum of one year, DBRS reverted its status back to delinquent when assessing the default frequencies. For example, a loan that was modified five months ago and was 60 days delinquent before modification will be treated as 60 days delinquent in determining default frequencies. In addition, depending on the severity of the pay histories, DBRS would apply the same method to non-modified loans with a derogatory pay history (that was subsequently cured) on a case-by-case basis.

In this transaction, Vericrest will not advance any principal and interest payments on delinquent mortgages to the securitization trust. This will likely result in lower loss severities to the bond holders because the advanced interest will not have to be reimbursed from the trust upon the liquidation of the mortgages. In its cash flow analysis, DBRS assumed that payments to the note holders will primarily be received from liquidation proceeds of mortgage properties. The expected timing of liquidation proceeds were stressed by DBRS after reviewing historical market trends. For example, liquidation proceeds for REOs that are already in contract were assumed to be received from month 3 to 12, REOs that have been listed from month 5 to 18, REOs that have not been listed from month 7 to 24, foreclosures from month 13 to 36, etc. For loans that are contractually current, DBRS ran a scenario with a front-loaded delinquency curve. In this scenario, any principal and interest collections are shut off as soon as loans become delinquent.

DBRS conducted a servicer review of Vericrest Financial, Inc. Corelogic performed a compliance due diligence on 100% of the mortgage loans as well as data integrity diligence on certain data fields for 100% of the mortgage loans. In addition, property valuations were obtained on 100% of the loans mostly in the form of broker price opinions (BPO).

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating U.S. Residential Mortgage-Backed Securities Transactions, which can be found on our website under Methodologies.

This is a Structured Finance rating.