DBRS Finalizes Ratings to Canada Mortgage Acceptance Corporation, Series 2006-C5

Dominion Bond Rating Service (DBRS) has today finalized ratings to the Mortgage Pass-Through Certificates, Series 2006-C5 (the Certificates) issued by Canada Mortgage Acceptance Corporation (CMAC), as indicated below:

--AAA to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Class A-1
--AAA to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Class A-2
--AAA to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Initial Class VFC
--AAA to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Class IO-P
--AAA to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Class IO-C
--AA to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Class B
--A to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Class C
--BBB to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Class D
--BB to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Class E
--B to the CMAC Mortgage Pass-Through Certificates, Series 2006 – C5, Class F

The ratings of the Certificates are primarily based on three factors, the first being the levels of structural enhancement commensurate with each rated class (Class A-1, Class A-2 and Class VFC have 11% credit enhancement, Class B has 7.4% enhancement, Class C has 4.7% and Class D has 2.85%). Secondly, the ratings are based on generally high quality borrowers (the weighted average credit score on origination was 703). And lastly, the ratings are based on the experience of GMAC Residential Funding of Canada, Limited (RFOC) and its parent, Residential Funding Company, LLC (RFC) in the residential mortgage market.

The Class IO-P and Class IO-C Certificates represent interest-only “strips” and are sensitive to prepayment assumptions. The AAA rating reflects the Class IO Certificateholders’ interest in excess interest collections over expenses and certificate interest, and does not evaluate the risks associated with prepayment.

Generally, the mortgages originated by RFOC are classified as conventional, Alt-A or sub-prime. Alt-A and sub-prime mortgages typically experience higher foreclosure frequency and loss severity than conventional mortgages. A large percentage of the Alt-A mortgages is “i declare” product, which represents 69.43% of all mortgages. With “i declare” underwriting standards, RFOC does not verify the income level of borrowers. Lack of income verification could suggest income volatility, but enhancement levels have been sized to mitigate this risk.

RFOC is an indirectly wholly owned subsidiary of RFC, focused on the origination of insured, Alt-A, conventional and sub-prime mortgages in Canada.

Notes:
Initial Class VFC, Class IO-C, Class E and Class F are non-offered certificates.
All figures are in Canadian dollars unless otherwise noted.