DBRS Confirms the Ratings on MBSCAT 1, FTA

DBRS Ratings Limited (“DBRS”) has reviewed MBSCAT 1, FTA (the “Issuer”) and has today confirmed the rating on the Series A Notes at ‘A’ (sf).

Confirmation of the ratings for the Series A Notes is based upon the following analytical considerations, as described more fully below:

• Portfolio performance, in terms of delinquencies and defaults, as of the July 2014 payment date.
  -Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
• Incorporation of a sovereign related stress component in the rating analysis to address the impact of macroeconomic variables on collateral performance given the long-term foreign and local currency rating of ‘A’ (low) for the Kingdom of Spain.
• Current available credit enhancement to the Series A Notes to cover the expected losses at the ‘A’ (sf) rating level.

MBSCAT 1, FTA is a securitisation of a portfolio of first and second lien loans and line of credits originated and serviced by Catalunya Banc (the “Originator”). The transaction follows the standard structure under the Spanish Securitisation Law and closed in November 2008.

The portfolio benefits from good seasoning (7.6 years) however, approximately 44% of the current pool is comprised of second lien loans. The portfolio is geographically concentrated in the region of Catalunya (70.55% of the pool) and Madrid (8.46% of the pool), but the geographic concentration is mitigated in part by the fact that these are the Originator’s traditional markets where it has a great expertise.

On 16 July 2014 Catalunya Banc repurchased 21.73% of the loans in the portfolio of which: 9.28% are performing, 8.80% are in arrears and 3.65% are defaulted.
The 90+ delinquency ratio dropped to 1.48% in July 2014, down from 5.94% in April 2014. This is primarily attributed to the repurchase of 8.80% of the pool of loans in arrears as of July 2014. The current cumulative default ratio (as a percentage of the original balance) has been increasing since the transaction closed in November 2008 and was 5.49% in July 2014.

The Series A Notes are supported by subordination of the Series B and C Notes and an amortising Reserve Fund which was fully funded at closing with the proceeds of a Subordinated Loan. Credit enhancement for the Series A Notes (as a percentage of the performing portfolio) increased to 52.43%, up from 37.70% in April 2014. The credit enhancement of 52.43% has been computed by accounting for the proceeds from the repurchased loans. These funds have been credited to the Issuer’s account and will be used to repay principal on the Series A Notes on the payment date falling in October 2014.

The Reserve Fund is available to protect the Series A, B and C Notes against both interest and principal shortfall on an on-going basis. It is allowed to amortise over the life of the transaction, but subject to the absolute floor of EUR 36.75 million. The current balance of the Reserve Fund is EUR 13.17 million (equal to 3.19% of the aggregate balance of the Series A, B and C Notes). This is below the current target level of EUR 36.75 million.

Banco Santander SA is the Treasury Account Bank for this transaction. The DBRS public rating of Banco Santander SA is at least equal to the Minimum Institution Rating given the rating assigned to the Series A Notes, as described in the DBRS Legal Criteria for European Structured Finance. Additionally, Banco Bilbao Vizcaya Argentaria (BBVA) acts as swap counterparty for this deal. The current DBRS public rating of BBVA complies with the DBRS Derivative Criteria for European Structured Finance Transactions.

Notes:
All figures are in Euro unless otherwise noted.
The principal methodology applicable is the Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include payment reports provided by Gestión de Activos Titulizados S.G.F.T., S.A. and data from the European DataWarehouse. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 26 July 2013, when DBRS confirmed the rating of the Series A Notes at ‘A’ (sf) and removed the Notes from Under Review with Developing Implications.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
• The base case PD and LGD of the current pool of mortgages for the Issuer are 10.48% and 37.35%, respectively. At the ‘A’ (sf) rating level, the corresponding PD is 26.73% and the LGD is 57.31%.
• The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Series A Notes would be expected to remain at ‘A’ (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Series A Notes would be expected to remain at ‘A’ (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating of the Series A Notes would be expected to remain at ‘A’ (sf).

Series A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of ‘A’ (sf)
• 50% increase in LGD, expected rating of ‘A’ (sf)
• 25% increase in PD, expected rating of ‘A’ (sf)
• 50% increase in PD, expected rating of ‘A’ (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of ‘A’ (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of ‘A’ (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of ‘A’ (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of ‘A’ (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

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

Initial Lead Analyst: Keith Gorman
Initial Rating Date: 25 February 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Mary Jane Potthoff

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

Legal Criteria for European Structured Finance Transactions
Master European Structured Finance Surveillance Methodology
Operational Risk Assessment for European Structured Finance Servicers
Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
Unified Interest Rate Model for European Securitisations