DBRS Confirms Rating on Vela RMBS S.r.l.

DBRS has today confirmed its AA (high) (sf) rating on the Class A Notes issued by Vela RMBS S.r.l.

The confirmation of the rating on the Class A Notes is based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of 30 June 2015.
-- Portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AA (high) (sf) rating level.

The Notes are backed by a portfolio of first lien, fully amortising mortgage loans originated by Banca Nazionale del Lavoro S.p.A. (BNL or the Originator). The portfolio is well distributed across Italian regions. The three regions most represented in the portfolio are Lazio (21.07%), Lombardy (14.92%) and Tuscany (8.53%). The collateral is amortising quickly with the pool factor now at 82.71% one year after closing. The portfolio consisted of 6,880 loans extended to the same number of borrowers. The transaction has a low Weighted-Average Current Loan-to-Value (WACLTV) of 51.80% (unindexed), down from 52.86% at closing.

As of 30 June 2015, 90+ delinquent loans accounted for 0.32% of the non-defaulted collateral pool balance. Cumulative defaulted loans as a percentage of the initial collateral pool balance at transaction closing was 0.02%. The collateral performance is within DBRS’s expectations.

Credit enhancement to the Class A Notes as a percentage of the performing collateral balance is 22.57%, up from 18.56% at closing. It is provided by subordination of the Class J Notes. The Reserve Fund has been established through an over issuance of the Class J notes and it is at its target of €10,092,000 (2.00% of original amount the Class A Notes). The Reserve Fund can amortise during the life of the transaction to 4.00% of the outstanding Class A Notes if some conditions are met. Additionally, the Reserve Fund has a floor of €2,523,000 (0.50% of the original amount of the Class A Notes). The Reserve Fund is available to pay the senior fees, the interest on the Class A Notes and defaults. Following the payment date on which the Reserve Fund begins to amortise, the amount above the target Reserve Fund amount will be used to repay the Class J notes.

Banca Nazionale del Lavoro S.p.A. is the Account Bank for the transaction. The DBRS private rating on the Account Bank complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes: All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent action.

Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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

The sources of information used for this rating include investor and payment reports provided by Securitisation Services S.p.A., servicer reports provided by BNL and data from the European DataWarehouse GmbH.

DBRS does not rely upon third-party due diligence in order to conduct its analysis; DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

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 previous rating action on this transaction took place on 8 October 2014, when DBRS assigned
the rating of AA (high) (sf) to the Class A Notes.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with 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 8.76% and 7.02%, respectively. At the AA (high) (sf) rating level, the corresponding PD is 30.22% and the LGD is 26.70%.
-- 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 Class A Notes would be expected to be at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to be at A (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to be at A (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (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 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: Davide Nesa
Initial Rating Date: 8 October 2014
Initial Rating Committee Chair: Erin Stafford

Lead Surveillance Analyst: Antonio Di Marco
Rating Committee Chair: Mary Jane Potthoff

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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 (September 2015)
-- Master European Structured Finance Surveillance Methodology (April 2015)
-- Operational Risk Assessment for European Structured Finance Servicers (January 2015)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (September 2015)
-- Unified Interest Rate Model for European Securitisations (January 2013)
-- Derivative Criteria for European Structured Finance Transactions (September 2015)

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375