DBRS Confirms Ratings of A (low) (sf) to the Notes Issued by LStreet II Series 2012-2 and removes Under Review with Developing Implications

DBRS, Inc. (“DBRS”) has today confirmed the rating of A (low) (sf) on the Series 2012-2 Class A-1 Notes and on the Series 2012-2 Class A-2 Notes (together the “Series 2012-2 Class A Notes”) issued pursuant to the Amended and Restated Series 2012-2 Supplement to the Base Indenture dated as of October 23, 2012. The Series 2012-2 Class A Notes are collateralized by the Class A-1LT-a and the Class A-1LT-b1 Notes of Davis Square Funding IV, Ltd., which is itself collateralized by a pool of sub-prime and Alt-A Residential Mortgage-Backed Securities (“RMBS”) and Commercial Mortgage-Backed Securities (“CMBS”).

The ratings address (i) the likelihood of the receipt by the Series 2012-2 Class A Noteholders of all principal distributions to which such Noteholders are entitled, and (ii) the likelihood of the receipt by the Series 2012-2 Class A Noteholders of the amount of Series 2012-2 Class A Interest to which such Noteholders are entitled in each case to the extent payable to the Series 2012-2 Class A Notes in accordance with the priorities of payment outlined in the Amended and Restated Series 2012-2 Supplement to the Base Indenture, on or before the Final Maturity Date in April 2040.

For the avoidance of doubt, the above DBRS ratings address the ultimate payment of the Series 2012-2 Class A-1 Principal (initial par of $225,000,000) and the timely payment of the Series 2012-2 Class A-1 Interest (USD 1 Month LIBOR plus 0.36% per annum), and the ultimate payment of Series 2012-2 Class A-2 Principal (initial par of $85,500,000) and the timely payment of the Series 2012-2 Class A-2 Interest (USD 1 Month LIBOR plus 0.36% per annum). The DBRS ratings do not address any other amounts which may be paid to the Series 2012-2 Class A Noteholders, including but not limited to, the Series 2012-2 Class A-1 Additional Amount or Series 2012-2 Class A-2 Additional Amount.

The rating action reflects the recent release of “RMBS Insight 1.2: U.S. Residential Mortgage-Backed Securities Loss Model and Rating Methodology” (“RMBS Insight 1.2”), which DBRS uses to rate and monitor structured credit transactions with underlying RMBS assets.

This methodology supersedes “RMBS Insight: U.S. Residential Mortgage-Backed Securities Loss Model and Rating Methodology,” (“RMBS Insight”) published January 23, 2012.

While DBRS does not deem the methodology updates to be material as RMBS Insight 1.2 substantially retains the core conceptual and structural framework of RMBS Insight, the key updates to the methodology include:

• The inclusion of an agency model that covers 30-year fully amortizing fixed rate agency loans with documentations;
• Updated house price model and forecast, as well as state-by-state foreclosure timelines;
• Additional variables with respect to loan modification and documentation type;
• A more refined approach in assessing purchase money mortgages.

DBRS has also removed the Under Review with Developing Implications designation from the rating. The rating action reflects the conclusion of the review to determine the impact of “RMBS Insight 1.2: U.S. Residential Mortgage-Backed Securities Loss Model and Rating Methodology.”

The principal methodology to be used to review the impact of the release of RMBS Insight 1.2 is “Rating Global Structured Finance CDO Restructurings,” which can be found on our website under Methodologies.

This credit rating has been issued outside the European Union (EU) and may be used for regulatory purposes by financial institutions in the EU.

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