DBRS Publishes Updated Canadian RMBS Methodology

DBRS has today published an updated version of its methodology for rating Canadian residential mortgage-backed securities (RMBS) transactions. The methodology kept the essence of the May 2008 methodology intact and updated the following sections:

(1) Insured Mortgages: The credit enhancement criteria has been expanded from AAA/R-1 (high) to include AA/R-1 (middle), “A”/R-1 (low) and BBB/R-2 (high).

(2) Mortgage Term to Maturity: The analysis for refinancing risk at the end of mortgage terms (balloon risk) has been enhanced.

(3) Cash Flow and Structural Analysis: The discussion of default timing curves, interest rate mismatch and interest rate swaps has been elaborated to provide more details on DBRS’s assumptions and expectations.

DBRS has reviewed all outstanding Canadian RMBS transactions and determined no rating action is warranted upon the release of this updated methodology.