DBRS Rates Northstar Spectrum One Limited Series 1 USD 401,038,522 Secured Notes due 2047

DBRS, Inc. (DBRS) has today assigned the following ratings to the Series 1 Secured Notes issued by Northstar Spectrum One Limited (the Trust).

-- $72.3 million Class A Senior Secured Notes at AAA (sf)
-- $26.4 million Class B Secured Notes rated at AA (sf)
-- $27.1 million Class C Secured Notes rated at ‘A’ (sf)

The Trust consists of 17 seasoned senior residential mortgage-backed securities (RMBS). The AAA (sf) rating on the Class A Notes reflects approximately 82% of credit enhancement. The AA (sf) rating on the Class B Notes reflects approximately 75% of credit enhancement. The A (sf) rating on the Class C Notes reflects approximately 69% of credit enhancement. The ratings also reflect the quality of the underlying assets.

DBRS does not rate the Class D Notes in this transaction.

Interest and principal payments on the securities will be made on the 9th of each calendar month, commencing in July 2012. The interest proceeds will generally be distributed on a sequential basis to the notes, and the principal proceeds will be distributed on a sequential basis until the principal balances of each class have been reduced to zero. Following the realisation or enforcement of security, all moneys will be applied in the payment of interest amount to Class A and then outstanding principal amount of Class A until zero, followed by interest amount and outstanding principal amount of Class B and Class C sequentially. All remaining proceeds will be paid to the Class D Notes.

Any losses realized from the underlying securities will be allocated in a reverse sequential order, until the principal balances have been reduced to zero.

The transaction is a resecuritization of 17 seasoned senior RMBS, each representing one real estate mortgage investment conduit (REMIC). The REMICs are backed by pools of seasoned Alt-A or option ARM, first lien, fixed- or adjustable-rate, one- to four-family residential mortgages.

The rating assigned to the offered securities address (i) the likelihood of the receipt by security holders of all principal distributions to which such security holders are entitled and (ii) the likelihood of the receipt by security holders of the amount of interest actually received by the trust to the extent payable to each class in accordance with the priorities described in the operative documents, as such interest received by the trust may be reduced by the allocation of certain net interest shortfalls allocated the underlying securities. For more details on the ratings, please refer to the offering and transaction legal documents.

DBRS ReREMIC Methodology Excerpt:
Since a ReREMIC is a pass-through of interest, principal and losses from the underlying certificates, its interest entitlement is usually capped at the actual interest amount collected on the underlying securities.

In other words, a ReREMIC trust cannot pay out more interest than it receives from its collateral, and sometimes, what is collected on the underlying securities can be as low as zero.

When rating ReREMICs, DBRS is assessing the ability of the trust making the full principal payment by the legal final maturity date of the transaction. These transactions typically define interest rate as the lesser of the bond coupon and the available interest funds. Hence, the DBRS rating does not provide an opinion on the timeliness or amount of interest payments the investor may receive. The trust’s only obligation is to pass through the interest proceeds net of fees from the underlying securities.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is RMBS Insight: U.S. Residential Mortgage-Backed Securities Loss Model and Rating Methodology, which can be found on our website under Methodologies.

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.