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Rating Action:

Moody's Investors Service assigns definitive credit ratings to 4 Classes of notes issued by Siena Mortgages 10-7 S.r.l.

Global Credit Research - 22 Nov 2010

Approximately EUR 3,479 million of debt securities affected

Milan, November 22, 2010 -- Moody's Investors Service has assigned definitive long term ratings to Italian RMBS notes issued by Siena Mortgages 10-7 S.r.l.

- Aaa (sf) to the EUR 595,000,000 Class A1 Residential Mortgage Backed Floating Rate Notes due 2070

- Aaa (sf) to the EUR 400,000,000 Class A2 Residential Mortgage Backed Floating Rate Notes due 2070

- Aaa (sf) to the EUR 1,666,900,000 Class A3 Residential Mortgage Backed Floating Rate Notes due 2070

- Caa1 (sf) to the EUR 817,600,000 Class B Residential Mortgage Floating Rate Notes due 2070

Moody's has not assigned any rating to the subordinated EURO 106,626,000 Class C Residential Mortgage Backed Variable Return Notes.

RATINGS RATIONALE

The ratings of the Notes take into account the credit quality of the underlying mortgage loan pool, from which Moody's determined the MILAN Aaa Credit Enhancement and the portfolio expected loss, as well as the transaction structure and any legal considerations as assessed in Moody's cash flow analysis.

The expected portfolio loss of 3.35% of the original balance of the portfolio and the MILAN Aaa required Credit Enhancement of 12.5% served as input parameters for Moody's cash flow model, which is based on a probabilistic lognormal distribution as described in the report "The Lognormal Method Applied to ABS Analysis", published in September 2000.

The transaction represents the ninth securitization of the Siena's RMBS series, the seventh rated by Moody's. The assets supporting the notes, which amount to around EUR 3,479.5 million, are prime mortgage loans secured on residential properties located in Italy originated by Banca Monte dei Paschi di Siena SpA ("BMPS"; A2/P-1), Banca Antonveneta ("BAV"), Banca Toscana ("BT"), Banca Agricola Mantovana ("BAM") and Banca 121, all part of the Banca Monte dei Paschi di Siena Group (Banca 121, BAM and BT merged in BMPS since 2002, 2008 and 2009 respectively; BAV merged in BMPS in 2008 and partly spun off in 2009). The portfolio will be serviced by BMPS.

The key drivers for the MILAN Aaa Credit Enhancement number, which is higher than other comparable prime Italian RMBS transactions, are (i) the weighted average loan-to-value (LTV) of 58.84%, which is in line with other Italian RMBS transactions but with an higher than average portion of loans with current LTV higher than 70% (39.6%), (ii) missing data on the current/arrear status and, for a portion of the portfolio (26%), on employment type and (iii) comparison with the historical default static cohorts volatility.

The key drivers for the portfolio expected loss are (i) defaults on global BMPS residential mortgage book, which have experienced a substantial increase in the last periods and show high volatility among vintages (ii) rolls rate derived from previous transactions and (iii) benchmarking with comparable transactions in the Italian market. Moody's believes the assumed expected loss is appropriate for this transaction.

The structure will benefit from a swap, provided by Royal Bank of Scotland plc (Aa3/P-1), which guarantees a margin above notes' index (135 bps) and from an amortizing cash reserve fully funded at closing for an amount equal to 3% of the rated notes. Liquidity in the transaction comes from principal to pay interest and from the cash reserve, but given the replenishment of the cash reserve will rank junior to payment of interest and principal on Class B, if the cash reserve has been fully drawn under extreme cases (such as servicer disruption) there may not be liquidity available to cover interests on the rated notes; however, the transaction documents contain certain mechanisms that mitigate this weakness.

The rating addresses the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal on or before the legal final maturity with respect of the Class A1, Class A2 and Class A3 notes, and ultimate payment of interest and principal on or before the legal final maturity with respect of the Class B notes. Moody's ratings only address the credit risk associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

The V-Score for this transaction is Low/Medium, which is in line with the V-Score assigned for the Italian RMBS sector. Only two sub components underlying the V Score deviate from the average for the Italian RMBS sector: i) the "Quality of historical data for the Issuer/Sponsor/Originator" which is assessed at Medium, higher than the Low /Medium sector's average, because the securitized portfolio has mainly (around 83%) been originated in 2009 and 2010: BMPS's originated volumes during these years have almost doubled the average origination volumes of the preceding five years and eventually historical data could not represent the portfolio future performance and ii) "Issuer/Sponsor/Originator's Historical Performance Variability" because of the high volatility among static cohorts performance and steep increase in defaults during the last market downturn. V-Scores are a relative assessment of the quality of available credit information and of the degree of dependence on various assumptions used in determining the rating. High variability in key assumptions could expose a rating to more likelihood of rating changes. The V-Score has been assigned accordingly to the report "V-Scores and Parameter Sensitivities in the Major EMEA RMBS Sectors" published in April 2009.

The principal methodologies used in this rating were Moody's Approach to Rating Italian RMBS, published in December 2004 and Cash Flow Analysis in EMEA RMBS: Testing Structural Features with the MARCO Model (Moody's Analyser of Residential Cash Flows), published in January 2006.

Moody's Investors Service received and took into account a third party due diligence report on the underlying assets in this transaction and the due diligence report had a neutral impact on the rating.

Moody's Parameter Sensitivities:

The model output indicated that Class A1, Class A2 and Class A3 would have achieved Aaa even if expected loss was as high as 10.05% (3.0x base case) assuming Milan Aaa CE at 12.5% (base case) and all other factors remained the same. Classes B would have achieved Caa1 for this same scenario.

The model output further indicated that the Class A1 and Class A2 would have achieved Aaa with Milan Aaa CE of 20.0% (1.6x base case), and expected loss of 3.35% (base case); Class A3 would have achieved Aa1 and Class B B3 for this same scenario.

Moody's Parameter Sensitivity provide a quantitative/model-indicated calculation of the number of rating notches that a Moody's-rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged and is not intended to measure how the rating of the security might migrate over time, but rather how the initial rating of the security might have differed if key rating input parameters were varied. Qualitative factors are also taken into consideration in the ratings process, so the actual ratings that would be assigned in each case could vary from the information presented in the Parameter Sensitivity analysis.

REGULATORY DISCLOSURES

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

The reports mentioned above are available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Additional research, including the new issue report for this transaction and reports for prior transactions, are available at www.moodys.com. In addition Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Milan
Francesca Pilu
Asst Vice President - Analyst
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100

Milan
Michelangelo Margaria
VP - Senior Credit Officer
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100

Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy

Moody's Investors Service assigns definitive credit ratings to 4 Classes of notes issued by Siena Mortgages 10-7 S.r.l.
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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