DBRS Rates Hipototta No. 11

DBRS, Inc. (DBRS) has today assigned a final rating of “AA” (high) (sf) to the Series A Notes of Hipototta No. 11 issued by TAGUS - Sociedade de Titularização de Créditos S.A. . The DBRS rating is a second rating on an existing transaction issued in July 2010. The notes are backed by a pool of prime, mostly variable rate, first-lien mortgage loans secured by residential properties in Portugal. At the close of the transaction in July 2010, the collateral balance stood at €2.000 million. As of the last Interest Payment Date (April 2011) the collateral balance was €1.785 million. The mortgages were originated and are serviced by Banco Santander Totta, S.A.

Hipototta No.11 issued two classes of mortgage-backed notes (Series A and Series B). DBRS rates Class A Notes only. As of the last interest payment date, the size of the rated A Note was €1.545 million. The class A has 15.69% credit enhancement which consists of 13.45% subordination and 2.24% from Reserve Account (€40 million) which was originally funded by the issuance of the Class C notes.

Interest and principal will be paid quarterly on the 30th of January, April, July and October. The first payment date following the issuance of the DBRS rating will be on 30 July 2011.

In March 2011, Banco Santander repurchased approximately €500 million of loans from six of the eight outstanding Hipototta transactions (including Hipototta No. 11) for violations of representations and warranties. Banco Santander discovered that across the outstanding transactions, loans were in breach of the representations and warranties which states the assets are either first or first and consecutive ranking mortgage liens and in the case of a second lien being securitised the first lien must be securitised in the same pool.

Banco Santander explained that the multiple loan parts did not have Property IDs assigned to each in the servicing system at the time they were selected to be included in each securitisation (only on the physical loan file). When originally selected, the loans were queried by Client ID and property value. In some cases, all of the loans for a single property may not have been included in the same pool. All loans did have unique Property IDs assigned, but not necessarily stored in the servicing system. Property IDs have since been manually updated within the servicing system.

Banco Santander also verified that the original and current LTVs are reported properly as each has been calculated on the total loan exposure for each property and are in compliance with the representations and warranties.

Banco Santander notified the Fund Manager and Account Bank of the issue. Funds were transferred to the Account Bank as repurchases from each trust. DBRS verified the amount of repurchases for Hipototta No. 11 to be €61,449,939.68 from the 31 March 2011 Monthly Servicer Report. The amount of repurchases amortised the Class A Notes on the April 2011 Interest Payment Date as described in the Pre-Enforcement Principal Payments section of the prospectus.

The ratings are based upon DBRS review of the following analytical considerations:
•Transaction capital structure and form and sufficiency of available credit enhancement.
•Relevant credit enhancement is in the form of excess spread, a funded reserve fund and subordination.
•The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to terms in which they have invested.
•The transaction parties’ capabilities with respect to originations, underwriting, servicing, and financial strength.
•The credit quality of the collateral and ability of the Servicer to perform collection activities on the collateral.
•A review of the legal structure and opinions.

DBRS credit analysis is performed on a loan-level basis and includes a probability of default and loss given default assessment, an originator- and servicer-specific historical performance review, a Portuguese housing market and property price trend evaluation, and finally a cash flow simulation based on various stresses to prepayments, timing of defaults and recoveries and interest rates.

DBRS made appropriate adjustments to our model parameters based on the analysis of market value declines in Portugal and the historical performance data provided by Banco Santander Totta, S.A.

Note:
All figures are in Euro unless otherwise noted.

The applicable methodologies are Master European Residential Mortgage-Backed Securities Rating Methodology and Legal Criteria for European Structured Finance Transactions, which can be found on our website under Methodologies, with adjustments made for the Portuguese mortgages. This is not a newly created financial instrument.

The sources of information used for this rating include data relating to the underlying mortgages provided by Banco Santander Totta, S.A. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is the first DBRS rating on this financial instrument.

For additional information on this rating, please refer to the linking document located below.

The full report providing additional analytical details is available by clicking on the link below or by contacting us at info@dbrs.com.

Lead Analyst: Keith Gorman
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: 4 May 2011