DBRS Confirms Ratings of Fortified Trust

DBRS Limited (DBRS) confirmed the ratings on all the outstanding Real Estate Secured Line of Credit-Backed Notes (the Notes) issued by Fortified Trust (the Trust) as follows:

-- Class A Notes, Series 2016-1 at AAA (sf);
-- Class B Notes, Series 2016-1 at AA (high) (sf);
-- Class C Notes, Series 2016-1 at A (high) (sf);
-- Class A Notes, Series 2017-1 at AAA (sf) (together with Class A Notes, Series 2016-1, the Class A Notes);
-- Class B Notes, Series 2017-1 at AA (high) (sf) (together with Class B Notes, Series 2016-1, the Class B Notes); and
-- Class C Notes, Series 2017-1 at A (high) (sf).

The confirmations are part of DBRS’s continued efforts to provide timely credit rating opinions and increased transparency to market participants.

The confirmations are based on the following factors:

(1) The levels of credit enhancement provided by subordination (3.9% and 1.9% for the Class A Notes and Class B Notes, respectively), the cash reserve account and excess spread of 1.37% for the Series 2016-1 Notes and 1.40% for the Series 2017-1 Notes annually.

(2) The Notes benefit from several structural elements typically found in securitizations in Canada that mitigate default risk and the risks related to the credit deterioration of associated counterparties.

(3) The assets in the pool are a well-diversified portfolio of home equity line of credit (HELOC) accounts with a minimum of 20% equity in each of the mortgaged properties, which secures the HELOC accounts.

(4) Performance of the underlying collateral remains stable and within expectations, with the net three-month average loss rate and monthly payment rate standing at -0.06% and 4.13%, respectively, as of May 2018.

The Bank of Montreal (BMO) is the servicer of the assets in the custodial pool. BMO is one of Canada’s largest banks by assets and is currently rated AA/R-1 (high) with Stable trends by DBRS.

The performance and characteristics of the custodial pool and the Notes are available and updated each month in the Monthly Canadian ABS Report (see Related Documents below).

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodologies are Rating Canadian Residential Mortgages, Home Equity Lines of Credit and Reverse Mortgages (November 2017), Legal Criteria for Canadian Structured Finance (July 2018), Derivatives Criteria for Canadian Structured Finance (July 2018) and Master Canadian Structured Finance Surveillance Methodology (May 2018), which can be found on dbrs.com under Methodologies.

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

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