DBRS Rates GMACM Mortgage Loan Trust 2010-1, Mortgage Loan-Backed Notes, Series 2010-1

DBRS has today assigned the following ratings to the Mortgage Loan-Backed Notes, Series 2010-1 issued by GMACM Mortgage Loan Trust 2010-1 (the Trust).

-- $166.4 million Class A rated at ‘A’

Transaction Summary:
The ‘A’ rating on the Class A Notes reflects 25% of credit enhancement provided by the subordinate certificates and excess interest. A reserve fund has been established for the benefit of the holders of the Class A Notes to cover approximately three and a half months of current interest. Additionally, the mortgage loans are either insured by the Federal Housing Administration (FHA) or partially guaranteed by the Veteran’s Administration (VA). The ratings on the notes also reflect the capabilities of GMAC Mortgage LLC as servicer. Bank of New York Mellon will serve as trustee and The Bank of New York Mellon Trust Company, N.A. will serve as custodian.

The subordinate certificates are not rated by DBRS.

Available funds include liquidation proceeds from FHA or VA claims paid, liquidation proceeds from sale of mortgaged properties where claims have been denied, interest advances by the servicer and any interest and principal collections from the mortgage loans. The servicer is obligated to advance interest at the greater of a) the collateral net coupon that was due but not collected and b) Class A note rate. The available funds will be distributed on the 25th of each month commencing in July 2010. Interest and principal payments will be paid sequentially by seniority. The reserve fund in the transaction will cover any interest shortfalls to the extent the servicer is unable to advance interest. The capital structure also has a severity trigger that would reallocate any interest due to the certificate holders to pay down the senior notes if 5% of the mortgage loans (by aggregate outstanding principal balance as of such cut-off date) experience losses that exceed 15% of the applicable cut-off date principal balance.

Default and Loss Severity Analysis:
The Trust as of the cut-off date contains mostly delinquent mortgage loans that that are approximately 97% FHA insured and 3% VA partially guaranteed. Given the non-performing nature of these loans, DBRS expects most of the collateral will eventually default. Payments to the note holders will primarily come from the claim proceeds or from the sale of mortgage properties if the claims are denied.

For FHA insured loans where claims are fully reimbursed, the loss severity is equal to the interest payments and foreclosure expenses not covered by the insurance. The claim reimbursements do not include a) interest payments during the first 60 days of delinquency, b) approximately 1/4 to 1/3 of the foreclosure expenses depending on HUD’s servicer ratings and c) the difference between the interests accrued at the mortgage rate and the debenture rate during the liquidation process. In estimating loss severities, DBRS reviewed historical servicer trends to stress the liquidation timeline and foreclosure costs. Additionally, debenture rates were stressed after reviewing past debenture rates.

Upon completing the above analysis, DBRS further adjusted the loss severities to incorporate claim denials and interest curtailment rates (detailed in the section below). Loss severities for the denied loans were assumed to be similar to that of a subprime mortgage with comparable loan characteristics.

Exception Loans – Claim Denial Rate Analysis and Due Diligence Review:
DBRS reviewed the servicer’s historical full claim denials and interest curtailment rates to further adjust loss severities on exception loans. The Department of Housing and Urban Development (HUD) can fully deny or curtail FHA claims for different reasons that include missing insurance certificates, excessive damage to properties, title issues, any deviation in practice by the originator or servicer from the program guidelines, late due diligence, late conveyance, late title package etc.

Additionally, DBRS reviewed results from four separate third-party due diligence efforts that included 1) a review of 200 loans to assess the servicer’s compliance with minimum standards under the FHA and VA servicing guidelines, 2) a regulatory compliance due diligence on 25% of the mortgage loans, 3) a review on 100% of loans to check whether a valid FHA insurance and VA guaranty is in place and 4) a review on 100% of manufactured homes (MH) (approximately 10% of the collateral) to ensure that all MH loans have good titles.

After assessing the historical claim denial trends and the due diligence results, DBRS assumed a stressed exception rate at 12% for the ‘A’ rating scenario. DBRS is of the opinion that with increasing claims being conveyed to the HUD, the HUD may increase their scrutiny of claims resulting in higher denial rates than what has been observed in the past.

In this transaction, if the denial or curtailment of a claim is a result of the servicer failing to adhere to applicable FHA or VA guidelines, the servicer is required to remit to the trust the difference between the claim proceeds which should have been received and the claim amounts actually received. Additionally GMAC Mortgage, LLC has made representations and warranties that each policy is a valid, binding and enforceable obligation of FHA and VA and that all actions necessary to ensure that each policy remains so have been taken. In its analysis of claim denials, DBRS has not given reliance on GMAC Mortgage’s ability to fulfill any of its buy-back obligations for denied claims due to its financial strength. DBRS currently rates Residential Capital LLC (ResCap), the parent of GMAC Mortgage, at ‘C’.

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.