DBRS Rates Potential Interest Rate Swap Termination Payment for Swap Agreement between Barclays Bank PLC (Swap Counterparty) and BCAP LLC Trust 2007-AA1

DBRS has today assigned the following rating to the ultimate payment of any potential interest rate swap (IRS) termination amounts, which may be owed by BCAP LLC Trust 2007-AA1 (the RMBS Trust or the Trust) to Barclays Bank PLC in the event of a failure to pay default where the Trust is the defaulting party:

-- IRS transaction between BCAP LLC Trust 2007-AA1 and Barclays Bank PLC with a swap termination date of January 17, 2017, rated “A.”

The IRS in the RMBS Trust provides for a fixed-rate payment to Barclays Bank PLC in exchange for a floating-rate (LIBOR) payment by Barclays Bank PLC to the Trust. The swap was intended to protect the capital structure in the RMBS Trust against rises in interest rates. LIBOR rates have fallen since transaction issuance. If this swap contract was to terminate today, there would be a termination payment owed to Barclays Bank PLC.

As part of the rating analysis, DBRS considers the adequacy of the collateral backing the RMBS trust to cover the swap termination payments, the performance of the collateral, as well as the quality of the legal and financial structure.

When rating swap termination payments, DBRS is assessing the ability of the trust making the swap termination payments to the counterparty by the legal final maturity date of the transaction. DBRS uses its RMBS Insight loss model to assess the probability of default, loss severity and expected losses on the underlying pool. An enhanced cash flow analysis is then performed to assess the risk that the collateral may exhaust, due to fast prepayments and/or loss occurrence, before the IRSs expire.

DBRS cash flow analysis includes running multiple fast voluntary prepayment speeds and passing through expected losses in a front-loaded pattern under various rating scenarios. Once cash flows are run, the stressed collateral cash flow is then compared against each period’s swap termination payments to determine if there is sufficient coverage to make these termination payments by the legal final maturity of the RMBS trusts. In these transactions, the swap termination payments owed to Barclays Bank PLC are senior in the payment priority to the certificateholders, if the Trust is the defaulting party. DBRS aggregates the swap cash flow for all future periods to derive the total potential swap termination payments. In these transactions there is a penalty rate assessed for any unpaid swap termination payments. DBRS uses its unified interest rate model to stress such penalty rate.

A rating is only assigned when under such rating scenario there is sufficient coverage of collateral to ultimately pay the swap termination payment should the trust default on its swap payment obligation on any distribution date.

The ratings do not address (1) the likelihood that a swap termination event occurs on or before the swap termination date, (2) the payment of any swap termination payments owed by Barclays Bank PLC to the Trust and (3) termination payment owed by the Trust to Barclays Bank PLC if Barclays Bank PLC is the defaulting party.

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

The applicable methodology is RMBS Insight 1.2: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, which can be found on our website under Methodologies.

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

DBRS's rating definitions and the terms of use of such ratings are available at www.dbrs.com.