DBRS Assigns Rating to Pearl Mortgage Backed Securities 3 B.V. (Pearl 3) Notes

DBRS Ratings Limited (DBRS) has today assigned ratings to some of the notes issued under Pearl Mortgage Backed Securities 3 B.V:

-- €748 million Class A rated AAA (sf)
-- €52 million Class S rated BBB High (sf)

The Class B notes, which are junior to the above class of notes, are not rated.

Pearl 3 is a securitisation of a portfolio of mortgage loans, benefitting from Dutch state’s Nationale Hypotheek Garantie (NHG) guarantee. The loans were originated by SNS Bank N.V. (SNS Bank) and its wholly owned subsidiary Regio Bank N.V. The loans are first ranking Dutch residential mortgages funded by the issuance of three classes of mortgage-backed notes. The mortgages will be serviced by SNS Bank.

The rating is based upon review by DBRS of the following analytical considerations:

•The transaction’s capital structure and the form and sufficiency of available credit enhancement. Relevant credit enhancement is in the form of subordination and excess spread, if available. The Class A is the most senior class of notes in the structure supported by a subordinated Class S notes (6.44%) and Class B notes (0.87%). Any shortfalls in payment of senior fees and interest on Class A & Class S notes are supported by a cash advance facility (1.00%).

•The Pearl 3 mortgage portfolio is revolving until March 2013. The issuer purchases new loans from SNS Bank subject to specific replenishment conditions. These conditions limit the change in credit risk profile of the mortgage portfolio during the revolving period.

•86.12% of loans in the mortgage portfolio pay a fixed rate of interest while the interest paid on the notes issued are floating linked to 3 months Euribor rate. To hedge interest rate risk the Pearl 3 structure is supported by a swap provided by BNP Paribas.

•SNS Banks capabilities with respect to originations, underwriting, servicing, and financial strength.

•The credit quality of the mortgages backing the notes and ability of the Servicer to perform collection activities on the mortgages.

•The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.

•The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

•DBRS analysis of ‘pay out’ data supplied by SNS Banks under the NHG scheme.

•DBRS was not provided with static performance data in order to be able to calculate a 2 year default probability. DBRS arrived at an estimate of 2 year PD using dynamic data.

Note:
All figures are in Euros unless otherwise noted.

The principal methodologies applicable are:
•Master European Residential Mortgage-Backed Securities Rating Methodology and the Dutch addendum
•Legal Criteria for European Structured Finance Transactions
•Swap Criteria For European Structured Finance Transactions
•Operational Risk Assessment for European RMBS Servicers
•Unified Interest Rate Model Methodology for European Securitisations
These can be found on our website under Methodologies.

The sources of information used for this rating include performance data relating to the receivables provided by SNS Bank. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The Class A notes are pre-existing financial instruments. The Class S note is a newly created financial instrument.

This is the first DBRS rating on these financial instruments.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

For additional information on these ratings, please refer to the linking document located below.

Lead Analyst: Alastair Bigley
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: December 20, 2011