DBRS Assigns Ratings to Banc of America Funding 2016-R1 Trust

DBRS, Inc. (DBRS) has today assigned the following ratings to the Resecuritization Trust Securities issued by Banc of America Funding 2016-R1 Trust (the Trust):

-- $249.9 million Class A1 at AAA (sf)
-- $8.2 million Class A2 at AA (sf)
-- $8.3 million Class M1 at A (sf)
-- $13.1 million Class M2 at BBB (sf)
-- $258.0 million Class A3 at AA (sf)
-- $266.3 million Class A4 at A (sf)
-- $279.4 million Class A5 at BBB (sf)

There is one group in this resecuritization trust. DBRS rates securities consisting of one seasoned residential mortgage-backed security (RMBS). The ratings on the securities reflect the credit enhancement provided by subordination and the quality of the underlying assets.

Other than the specified securities above, DBRS does not rate any other securities in this transaction.

Except as otherwise described below, interest and principal payments will be made on the business day following the related underlying distribution date, commencing in August 2016. Generally, interest payments will be distributed on a sequential basis to the securities and principal will be distributed on a sequential basis until the class principal balances thereof are reduced to zero.

The underlying security is not currently receiving payments of principal or interest. Thus, any interest accrued on Capitalized Interest Securities (the Senior Securities and the Mezzanine Securities) during such period will be added to their related class principal balances rather than being paid as interest. On and after the distribution date when the underlying security first receives payments of principal and interest, accrued interest will no longer be added to the class principal balances of the related Capitalized Interest Securities, but will instead be distributed as interest thereon. Also, prior to the distribution date in January 2018, the subordinate notes will not be entitled to any payments of interest. On and after such distribution date, the subordinate notes will receive their payments of interest currently.

Realized losses will be applied to reduce the class principal balances of the related offered securities in inverse order of priority of principal distributions until the class principal balances thereof have been reduced to zero.

This transaction is a resecuritization, consisting of one seasoned RMBS represented by one real estate mortgage investment conduit (REMIC). The REMIC is backed by a pool of seasoned Alt-A residential mortgages.

The ratings assigned to the offered securities address (1) the likelihood of the receipt by securityholders of all principal distributions to which such securityholders are entitled and (2) the likelihood of the receipt by securityholders of the amount of interest actually received by the Trust to the extent payable to each class in accordance with the priorities described in the operative documents (as such interest received by the Trust may have been reduced as a result of any interest shortfalls allocated to the underlying security and, as such, interest entitlement may be further reduced by the allocation of extraordinary Trust expenses).

DBRS REREMIC METHODOLOGY EXCERPT
Since a ReREMIC is a pass-through of interest, principal and losses from the underlying certificates, its interest entitlement is usually capped at the actual interest amount collected on the underlying securities. In other words, a ReREMIC trust cannot pay out more interest than it receives from its collateral and what is collected on the underlying securities can sometimes be as low as zero.

When rating ReREMICs, DBRS is assessing the ability of the trust to make the full principal payment by the legal final maturity date of the transaction. These transactions typically define interest rate as the lesser of the bond coupon and the available interest funds. Hence, the DBRS rating does not provide an opinion on the timeliness or amount of interest payments that the investor may receive. The trust’s only obligation is to pass through the interest proceeds, net of fees from the underlying securities.

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

The applicable methodology is RMBS Insight 1.2: U.S. Residential Mortgage-Backed Notes Model and Rating Methodology (October 2015), which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

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