DBRS Publishes Updated Methodologies for U.S. Private Student Loan ABS Securitizations

DBRS has today published an updated methodology regarding its rating approach for U.S. Private Student Loan ABS transactions. The methodology outlines the key factors analyzed, which include:

-- Quality of originations and underwriting practices,
-- Quality of servicing capabilities (as outlined in the DBRS methodology “Operational Risk Assessment for U.S. ABS Servicers),
-- Collateral quality analysis,
-- Transaction capital structure and credit enhancement,
-- Cash flow scenario analysis and
-- Legal structure and opinions.

Changes to the methodology mainly relate to the derivation and application of assumptions utilized by DBRS in its cash flow stress scenarios. The material changes include the revision of stressed default figures for each rating category, which are based on a multiple versus a standard deviation approach; a revised approach for determining assumptions affecting transaction cashflows, including default timing, recoveries, deferment and forbearances utilization, prepayment rates, borrower benefit utilization rates and delinquencies; and new basis risk stresses.

The development of our updated methodology aligns the statistical approaches that DBRS utilizes when rating other asset classes and is based on the DBRS analysis of historic private student loan performance and private student loan ABS transactions.

DBRS has also published its new stressed forward interest rate curves per its new “Unified Interest Rate Model for U.S. Private Student Loan and U.S. Federal Family Education Loan Program Securitizations” that sets forth a consistent platform for the application of interest rate stresses applied across all U.S. student loan ABS ratings.

These methodologies, effective as of the date of this press release, supersede any previous methodologies. While it is not anticipated that the methodologies will result in any rating actions, all private student loan transactions rated by DBRS are placed Under Review with Developing Implications and any rating actions will be published as soon as possible.

DBRS criteria and methodologies are publicly available on its website www.dbrs.com under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.