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

DBRS, Inc. (DBRS) assigned the following ratings to the Resecuritization Trust Securities previously issued by Banc of America Funding 2016-R1 Trust (the Trust) on July 29, 2016:

-- $22.9 million Class B1 at A (high) (sf)
-- $23.8 million Class B2 at BBB (high) (sf)

This transaction is a resecuritization consisting of one seasoned residential mortgage-backed security (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 on the securities reflect the credit enhancement provided by subordination and the quality of the underlying assets.

DBRS has previously assigned ratings to certain other classes in this transaction.

Interest and principal payments on the securities are made on the business day following the underlying distribution date. Generally, interest payments are distributed on a sequential basis to the securities and principal is distributed on a sequential basis until the class principal balances thereof are reduced to zero. Certain accretion-directed classes may benefit from additional principal payments from the accrual class. In its analysis, DBRS does not give credit to these additional principal payment amounts.

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

The ratings assigned to the 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).

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.

The rating assigned to Class B1 differs from the rating implied by the quantitative model. DBRS considers this difference to be a material deviation, but in this case, the ratings of the subject notes reflect certain structural features that are not fully reflected in the quantitative model output and additional seasoning is required to substantiate a higher rating.

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

The principal methodology is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, which can be found on dbrs.com under Methodologies & Criteria.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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

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