DBRS Assigns AAA (sf) Rating to Platinum Canadian Mortgage Trust, Series 2010-1

DBRS has today assigned a rating of AAA (sf) to the Home Equity Lines of Credit Receivables-Backed Floating Rate Notes, Series 2010-1 (the Notes) issued by Platinum Canadian Mortgage Trust (the Trust). The Notes have a principal balance of $500 million and an expected final payment date of December 15, 2015.

The rating is based on the following factors:

(1) Historical loss levels have been extremely low as all home equity line of credit (HELOC) accounts are secured by Canada Mortgage and Housing Corporation (CMHC)-insured, prime credit, first-lien mortgages on residential properties. CMHC is an agent of Her Majesty in right of Canada and is rated AAA by DBRS.

(2) The maximum loan-to-value for any HELOC account is 80%, which ensures a minimum 20% equity in the properties, based on the original appraisal values.

(3) The level of credit enhancement is commensurate with AAA-rated programs in Canada consisting of similarly insured mortgage products, provided by (i) the Cash Reserve Account, which is seeded at 0.50%, and (ii) excess spread of 0.51% through a swap with the seller.

Despite the above strengths, DBRS notes the following challenges:

(1) A weakened housing market in Canada could result in higher defaults and lower recovery rates than those factored into the assumptions determining credit enhancement levels. This risk is significantly mitigated by the mortgage insurance provided by AAA-rated CMHC.

(2) The credit quality of the portfolio may change over time as Manulife Bank of Canada (MBC) may modify its credit and collections policy for competitive reasons. This risk is also significantly mitigated by the mortgage insurance provided by CMHC.

(3) There is a liquidity gap between the expected final payment of the notes and the observed monthly payment rate of 5% to 7%. This is mitigated by the monthly Controlled Accumulation Amount, which will be accumulated 20 months prior to the expected final payment date (subject to certain conditions), the re-allocation of available principal collections for maturing series and a legal maturity date seven years after the expected final payment date.

MBC, rated A (high) and R-1 (middle), had assets of $16.7 billion as at October 31, 2010, and is the originator, seller and servicer of the assets and the swap counterparty for the Notes.

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

The applicable methodologies are Rating Canadian Home Equity Lines of Credit (HELOCs), Canadian RMBS Methodology and Legal Criteria for Canadian Structured Finance, which can be found on our website under Methodologies.

MEDIA CONTACT:
Caroline Creighton
Senior Vice President,
Communications
Tel. +1 416 597 7317
ccreighton@dbrs.com