Press Release

DBRS Confirms Ratings of Towd Point Mortgage Funding 2017-Auburn 11 Plc

RMBS
December 21, 2018

DBRS Ratings Limited (DBRS) confirmed its ratings of the notes issued by Towd Point Mortgage Funding 2017-Auburn 11 Plc (the Issuer) as follows:

-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)

The ratings of the Class A1 Notes and Class A2 Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The ratings of the Class B Notes and Class C Notes address the ultimate payment of interest (net of any Net WAC Additional Amounts) and principal on or before the legal final maturity date.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

The Issuer is a securitisation of U.K. mortgages secured over residential properties and originated and serviced by Capital Home Loans (CHL). The mortgages were later purchased by Promotoria (Lansdowne) Limited in 2015, before its acquisition by Cerberus European Residential Holdings B.V. and its subsequent sale to the Issuer. Over 90% of the mortgages are for buy-to-let purposes.

PORTFOLIO PERFORMANCE
As of October 2018, two- to three-month arrears represented 0.2% of the outstanding portfolio balance, and the 90+ delinquency ratio was 0.6%. Realised losses represent 0.28% of the original portfolio balance, with a cumulative recovery rate of 78.1%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 6.7% and 20.5% respectively.

CREDIT ENHANCEMENT
As of the November 2018 payment date, credit enhancement to the Class A1 Notes was 29.5%, up from 26.8% at the DBRS initial rating. Credit enhancement to the Class A2 Notes was 24.0%, up from 21.8% at the DBRS initial rating. Credit enhancement to the Class B Notes was 18.3%, up from 16.5% at the DBRS initial rating. Credit enhancement to the Class C Notes was 14.1%, up from 12.8% at the DBRS initial rating. Credit enhancement in each case is provided by subordination of junior classes.

Elavon Financial Services DAC, U.K. Branch (Elavon) acts as the account bank for the transaction. Based on the DBRS private rating of Elavon, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the Class A1 and Class A2 Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the ratings is the “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 legal 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. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include investor reports and loan-level data provided by CHL.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 15 January 2018, when DBRS confirmed the ratings of the Class A1 Notes, Class A2 Notes, Class B Notes and Class C Notes.

The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.

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 PD and 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 loans for the Issuer are 6.7% and 20.5%, respectively.
-- 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 A1 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A1 Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A1 Notes would be expected to fall to A (high) (sf).

Class A1 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 AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)

For further information on DBRS historic 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 and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 2 February 2017

DBRS Ratings Limited
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31st Floor
London
EC3M 3BY
United Kingdom

Registered in England and Wales: No. 7139960.

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
-- European RMBS Insight Methodology
-- European RMBS Insight: U.K. Addendum
-- Interest Rate Stresses for European Structured Finance Transactions

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.