DBRS Assigns Ratings to APS Resecuritization Trust 2016-3

DBRS, Inc. (DBRS) has today assigned the following ratings to the REMIC Certificates, Series 2016-3 issued by APS Resecuritization Trust 2016-3 (the Trust):

-- $35.4 million Class 1-A rated BBB (sf)
-- $23.9 million Class 2-A rated BBB (sf)

There are four groups in this resecuritization trust. DBRS rates certificates from Group 1 and 2. Group 1 consists of three seasoned senior residential mortgage-backed securities (RMBS) and Group 2 consists of four seasoned senior residential mortgage-backed securities (RMBS). The ratings on the certificates reflect the credit enhancement provided by subordination and the quality of the underlying assets.

Other than the classes specified above, DBRS does not rate any other securities in this transaction.

Interest and principal payments on the certificates will be made on the second business day following the underlying securities distribution date, commencing in October 2016. The payment distribution described below is generally the same for Groups 1 and 2. Interest distribution amounts will be distributed sequentially to the certificates. The Class MZ certificates, which are accrual certificates, will not be entitled to receive interest payments until the Class A certificates have been reduced to zero and such interest payments will instead first be used to pay down the principal balances of the Class A certificates. Principal distribution amounts (other than special recovery remittance amounts) will be distributed sequentially to the Class A and MZ certificates until their respective principal balances are reduced to zero.

This transaction has group-level triggers (special recovery trigger event) to identify potential settlement proceeds. To the extent a group-level trigger event occurs, then a group-level special recovery remittance amount is calculated by the trustee, to be distributed to the certificates of such group. This special recovery remittance amount is distributed sequentially to the Class MZ and A certificates. However, the amount distributed first, to the Class MZ certificates, may be limited to ensure that such distribution does not cause the Class A credit enhancement percentage to be lower than the greater of the closing date or the prior distribution date Class A credit enhancement percentage. Further details are described in the offering memorandum.

The ratings assigned by DBRS to the certificates address (1) the likelihood of the receipt by certificates of all principal distributions to which such certificateholders are entitled and (2) the likelihood of the receipt by its certificateholders of the amount of interest actually received by the trust to the extent payable to the certificates in accordance with the priorities described in the offering memorandum (as such interest received by the trust may have been reduced as a result of the allocation of additional trust fund expenses as described in the offering memorandum). The ratings assigned to the certificates do not address the likelihood that holders of the certificates will receive interest at the formula rate or that holders of the certificates will receive any carryforward interest. The ratings also do not address the likelihood or effect of any additional trust fund expenses that the trust might incur.

DBRS ReREMIC METHODOLOGY EXCERPT:
Since a ReREMIC is a pass-through of interest, principal and losses from the underlying securities, 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 making 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 the investor may receive. The trust’s only obligation is to pass through the interest proceeds net of fees from the underlying securities.

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

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

The applicable methodology is RMBS Insight 1.2: U.S. Residential Mortgage-Backed Notes Model and Rating Methodology, which can be found on our website under Methodologies.