DBRS Rates Bayview Opportunity Master Fund II Trust 2010-1NPL

DBRS has today assigned the following ratings to the Mortgage-Backed Notes, Series 2010-1NPL issued by Bayview Opportunity Master Fund II Trust 2010-1NPL(the Trust).

-- $79.5 million Class A rated at A (sf)

The A (sf) on the Class A Notes reflects 70.0% of credit enhancement provided by overcollateralization. Additionally separate reserve funds have been established for the benefit of the holders of the Class A notes to cover nine months of current interest (Liquidity Reserve Account) and servicing fees (Servicing Reserve Account). The ratings on the notes also reflect the quality of the underlying assets and the capabilities of Bayview Loan Servicing, LLC (Bayview) as servicer. U.S. Bank NA will serve as trustee and custodian.

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 28th of each month commencing in November 2010. Available funds will first be used to pay current interest on the Notes, followed by required amounts to be deposited in the reserve accounts, and finally as payment of principal in respect of the Notes until the class balance has been reduced to zero.

The Trust as of the cut-off date contains approximately 46% non-performing mortgage loans, 49% performing mortgage loans and 5% REO properties. The performing loans are defined as less than 60 days delinquent in payment as per the MBA method as of the cut-off date, but most of them have had derogatory pay histories in the past. DBRS has categorized any mortgage loan that is not contractually current as of the cut-off date as delinquent. However, a portion of the delinquent loans in the trust have made at least one of the prior three monthly payments. The mortgage loans are on average 52 months seasoned (as of loan origination date), 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 current LTV of 108% and an approximate updated non-zero weighted average FICO score of 556. Additionally, 37% 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, Bayview 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 and servicer experience. For example, liquidation proceeds for REOs that are already in contract were assumed to be received from month 3 to 12, for REOs that have been listed liquidation proceeds will be received from month 5 to 18, for REOs that have not been listed liquidation proceeds will be received from month 7 to 24, for foreclosures liquidation proceeds will be received 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 Bayview. An independent third party due diligence firm performed compliance due diligence and data integrity diligence on 29% of the initial mortgage pool. In addition, property valuations were obtained on 100% of the loans 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.