DBRS Rates CSMC Series 2010-16

DBRS has today assigned the following ratings to the Mortgage-Backed Securities, Series 2010-16 issued by CSMC Trust 2010-16 (the Trust).

-- $ 69.6 million Class A-1 rated at AAA (sf)
-- $ 24.4 million Class A-2 rated at AA (sf)
-- $ 20.9 million Class A-3 rated at A (sf)
-- $ 17.4 million Class A-4 rated at BBB (sf)
-- $ 100 Class R-1 rated at AAA (sf)
-- $ 100 Class R-2 rated at AAA (sf)

The AAA (sf) ratings in this transaction reflect the 80.00% of credit enhancement provided by subordination, overcollateralization and monthly excess spread. The AA (sf), “A” (sf) and BBB (sf) ratings reflect 73.00%, 67.00% and 62.00% of credit enhancement respectively. Other than the specified classes above, DBRS does not rate any other classes in this transaction.

The ratings on the notes also reflect the quality of the underlying assets and the capabilities of Select Portfolio Servicing, Inc. as servicer. The Bank of New York Mellon will serve as trustee and custodian.

Interest and principal payments collected from the mortgage loans will generally be distributed on the 25th of each month, commencing in September 2010. Interest will be paid to the notes on a pro rata basis. Principal will be paid to the notes in sequential order beginning with the Class A-1 Certificates until the principal balance has been reduced to zero.

The Trust contains seasoned mortgage loans originated by GMAC Mortgage (79.2%) and various other originators. The loans are on average 49 months seasoned first-lien, fixed and adjustable rate mortgages secured by one- to four-family residential properties. As of the cut-off date (August 1, 2010), the loans had an aggregate principal balance of approximately $350,389,140, a weighted-average (W.A.) mortgage rate of 5.36% and a W.A. updated FICO score of 654. DBRS calculated an approximate W.A current loan-to-value (LTV) ratio of 145.7% using updated broker price opinions (BPO) values. The BPOs were no more than 6 months seasoned as of the cut-off date, and DBRS assumed further market value declines when the borrowers default.

As of the cut-off date, 95.6% of the loans were current and 4.4% were 30-days delinquent under the MBA method and 2.0% of the loans were in bankruptcy. Additionally, 39.11% of the pool had 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 methodology to non-modified loans with a derogatory pay history (that was subsequently cured) on a case-by-case basis.

In this transaction, Select Portfolio Servicing 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. Additionally, the pass-through rates on the certificates are capped at the actual interest collected on the underlying mortgages less servicing fees. When performing cash flow analysis, DBRS approximated a delinquency curve by front-loading our standard loss timing vectors. Any principal and interest collections were shut off as soon as loans become delinquent, until they are liquidated. Given the amount of anticipated loan modifications, DBRS also ran various cash flow stresses assuming the collateral WAC may be reduced (“WAC deterioration”).

Allonhill performed an initial compliance diligence on 645 randomly selected loans which was approximately 45% of the anticipated mortgage pool by balance. As a result of identifying either a state high cost/predatory or a HOEPA violation, the compliance diligence was further expanded by an additional 128 loans. These 128 loans were selected if the property was located in a state where the initial compliance diligence had identified violations and the loan had characteristics that would render the loan subject to the applicable test for state high cost/predatory lending or HOEPA violations. Allonhill performed limited credit and servicing review and this included review of a) pay history for either 12 or 36 months for all the loans b) occupancy status based on servicer records for 681 prospective loans and c) servicer comments for issues related to loan or property for 681 prospective loans. Property valuations were obtained on 100% of the loans in the form of BPOs. Allonhill reviewed 10% of BPOs to ensure that BPO dates rendered were accurate and that BPO was done by a licensed broker. Allonhill also performed a data integrity review on 100% of the loans to identify discrepancies between the loan files and the data file. For more details on the diligence, please refer to the offering documents.

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.

DBRS's rating definitions and the terms of use of such ratings are available at www.dbrs.com.

This is a Structured Finance rating.