DBRS Confirms Rating on Class A Notes Issued by Vela RMBS S.r.l.

DBRS Ratings Limited (DBRS) confirmed its AAA (sf) rating on the Class A Notes issued by Vela RMBS S.r.l. (the Issuer).

The confirmation follows an annual review of the transaction and is based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of July 2017;
-- Portfolio default (PD) rate, loss given default (LGD) rate and expected loss assumptions for the outstanding collateral pool; and
-- The current credit enhancement (CE) available to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in October 2050.

Vela RMBS S.r.l. is a securitisation of first lien, fully amortising mortgage loans originated and serviced by Banca Nazionale del Lavoro S.p.A. (BNL or the Originator). The portfolio is well distributed across Italy. The three regions most represented in the portfolio are Lazio (23.73%), Lombardy (14.94%) and Veneto (9.73%). The collateral is amortising quickly with the pool factor standing at 42.02% after almost three years since closing. The portfolio consisted of 4,515 loans extended to Italian borrowers. The transaction has a low Weighted-Average Current Loan-to-Value (WACLTV) of 46.62% (unindexed), down from 49.28% in July 2016.

PORTFOLIO PERFORMANCE
The portfolio is performing well and within DBRS’s expectations. As of July 2017, the loans more than 90 days delinquent accounted for 0.35% of the outstanding collateral pool balance, up from 0.21% in July 2016. Cumulative defaulted loans as a percentage of the initial pool balance were 0.65%, up from 0.41% in July 2016.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool of receivables and updated the PD and LGD assumptions on the remaining collateral pool to 27.74% and 23.48% (including sovereign adjustment), respectively.

CREDIT ENHANCEMENT
As of July 2017, credit enhancement to the Class A Notes was 43.19%, up from 18.56% at closing. Credit enhancement to the Class A Notes is provided by the subordination of the Class J Notes and includes the amortising Reserve Fund, which is currently at its target level of EUR 6.8 million (4% of the outstanding balance of the Class A Notes). The Reserve Fund is available to pay senior fees and expenses, missed interest on the Class A Notes and to clear the outstanding balance of the PDL.

BNL is the Account Bank for the transaction. The DBRS private rating on the Account Bank complies with the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “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 DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of data and information used for this rating include quarterly servicer reports provided by BNL, investors and payments reports provided by Securitisation Services S.p.A. and loan-by-loan data from the European DataWarehouse GmbH.

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

At the time of the initial rating DBRS was not 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 this rating 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 6 October 2016, when DBRS upgraded the Class A Notes to AAA (sf) from AA (high) (sf).

The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a Base Case PD and LGD for the portfolio 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 pool of mortgages for the Issuer are 5.33% and 2.29%, respectively. At the AAA (sf) rating level, the corresponding PD is 27.74% and the LGD is 23.48%.

-- 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 increased by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increased by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increased by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf).

Class A 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 AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

For further information on DBRS historical 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: Ilaria Maschietto, Financial Analyst
Rating Committee Chair: Vito Natale, Head of EU RMBS & CBs
Initial Rating Date: 8 October 2014

DBRS Ratings Limited
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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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations

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.