DBRS Rates Banc of America Funding 2011-SD1 Trust

DBRS has today assigned the following ratings to the Mortgage Pass-Through Certificates, Series 2011-SD1 issued by Banc of America Funding 2011-SD1 Trust (the Trust).

-- $ 27.3 million Class A rated at AAA (sf)
-- $ 3.1 million Class M1 rated at AA (sf)
-- $ 2.4 million Class M2 rated at A (sf)
-- $ 1.7 million Class M3 rated at BBB (sf)

The AAA (sf) ratings in this transaction reflect the 37.5% of credit enhancement provided by subordination. The AA (sf), A (sf) and BBB (sf) ratings reflect 30.5%, 25.0%, and 21.0% of credit enhancement, respectively. Other than the classes specified above, DBRS does not rate any other classes in this transaction.

The ratings on the certificates also reflect the quality of the underlying assets and the capabilities of Nationstar Mortgage LLC (approximately 85% of the mortgage loans), PHH Mortgage Corporation (approximately 10% of the mortgage loans) and First Republic Bank (approximately 5% of the mortgage loans) as servicers. U.S. Bank National Association will serve as trustee and Wells Fargo Bank, National Association will serve as custodian.

Interest and principal payments collected from the mortgage loans will generally be distributed on the 25th of each month, commencing in June 2011. Interest will be paid to the certificates on a sequential basis. Principal will be paid to the certificates on a sequential basis, until the principal balance has been reduced to zero.

As of the cut-off date of May 1, 2011, the Trust contained 103-months seasoned, first lien, fixed rate mortgages secured by one- to four-family residential properties. The mortgage loans had an aggregate principal balance of approximately $43.6 million, a weighted-average (W.A.) mortgage rate of 5.9%, a W.A. updated FICO score of 671 and a W.A current loan-to-value (LTV) of 68.29%. The current LTVs were determined using updated broker price opinion (BPO) values. The BPOs were no more than 4 months seasoned as of the closing date, and DBRS assumed further market value declines when the borrowers default.

As of the cut-off date, approximately 94% of the loans were current, 6% were 30-days delinquent under the MBA method and less than 1% were in bankruptcy. Additionally, approximately14% of the loans in the pool had been previously 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, 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, Nationstar (servicing approximately 85% of the mortgage loans) will not advance any principal and interest payments on delinquent mortgages to the securitization trust. This will likely result in lower loss severities for Nationstar serviced loans to the bond holders because the advanced interest will not have to be reimbursed from the trust upon the liquidation of the mortgages. PHH and First Republic will advance principal and interest payments on delinquent loans to the Trust. The coupons on the certificates are capped at the actual interest collected on the underlying mortgages less 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 became delinquent, until they were liquidated.

A third-party due diligence firm performed compliance and twelve-month pay history reviews on 139 of the 140 loans in the mortgage pool. Property valuations were obtained on 100% of the loans in the form of BPOs. Additionally, a third party reviewed 30 BPOs to determine if the initial BPO values provided were reasonable for the subject properties. 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.