DBRS Upgrades Class A Notes of Vela RMBS S.r.l.

DBRS Ratings Limited (DBRS) has today upgraded the rating on the Class A Notes (the Notes) issued by Vela RMBS S.r.l. (the Issuer) to AAA (sf) from AA (high) (sf).

The upgrade of the rating on the Notes is based on the following analytical considerations, which are described more fully below:

-- Portfolio performance in terms of delinquencies and defaults as at the July 2016 payment date.
-- Portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- The current credit enhancement available to the Notes to cover the expected losses assumed, which is in line with the AAA (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). The portfolio is well distributed across Italian regions. The three regions most represented in the portfolio are Lazio (23.62%), Lombardy (13.23%) and Veneto (9.32%). The collateral is amortising quickly, with the pool factor now at 57.55% two years after closing. The portfolio consisted of 4,515 loans extended to the same number of borrowers. The transaction has a low weighted-average current loan-to-value ratio of 49.28% (unindexed), down from 51.80% as at July 2015.

As at the July 2016 payment date, the 90+ delinquency ratio was at 0.21% of the performing collateral portfolio. The cumulative default ratio was at 0.41% of the original collateral portfolio. The collateral performance is within DBRS’s expectations.

The credit enhancement available to the Notes consists of the subordination of the Class J Notes and the Reserve Fund. The credit enhancement increased over the year to 32.48% of the performing portfolio balance, up from 18.56% at closing. The amortising Reserve Fund is available to cover any interest and principal shortfall and is at its target level of EUR 10,092,000.

BNL is the account bank for the transaction. The DBRS private rating on the account bank complies with the minimum institution rating for the account bank given the rating assigned to the 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 “Master European Structured Finance Surveillance Methodology.”

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

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

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

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” found at 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 loan-by-loan data from 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 to be 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 8 October 2015 when DBRS confirmed the Notes at AA (high) (sf).

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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 the credit rating.
-- The Base Case PD and LGD of the current pool of mortgages for the Issuer are 8.76% and 7.02%, respectively. At the AAA (sf) rating level, the corresponding PD is 33.03% and the LGD is 30.75%.
-- 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 Notes would be expected to be AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Notes would be expected to be AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Notes would be expected to be at AAA (sf).

Class A Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (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: Davide Nesa
Initial Rating Date: 8 October 2014
Initial Rating Committee Chair: Erin Stafford

Lead Surveillance Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Quincy Tang, Managing Director

DBRS Ratings Limited
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The rating methodologies 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

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.