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Rating Action:

Moody's assigns Aaa to SMBC's 21th RMBS

29 Jun 2010

JPY 46.5 Billion of Senior Trust Certificates and JPY 23.0 Billion of Specified Bonds Rated

Tokyo, June 29, 2010 -- Moody's Investors Service has assigned definitive ratings of Aaa to the JPY 46.5 billion SMBC Residential Mortgage Trust Certificates No. 21 (Class A1 and Class A2, collectively the "Senior Trust Certificates") and JPY 23.0 billion SMBC 21th RMBS Special Purpose Company Specified Bonds (the "Specified Bonds").

The Senior Trust Certificates and Specified Bonds are backed by a pool of residential mortgage loan receivables originated by Sumitomo Mitsui Banking Corporation.

The ratings address the expected loss posed to investors by the legal final maturity date. The structure allows for timely payments of dividends (in scheduled amounts, on scheduled payment dates) or timely payments of interest, and ultimate repayment of principal by the legal final maturity date.

The complete ratings action is as follows,

Transaction name: SMBC Residential Mortgage Trust Certificates No. 21

Class A1: JPY 23.0 billion Senior Trust Certificates, rated Aaa

Class A2: JPY 23.5 billion Senior Trust Certificates, rated Aaa

Scheduled Dividend: Fixed

Payment Frequency: Monthly

Credit Enhancement: Over-collateralization (9.5% Subordination [=A/B])

A: The amount of the Subordinated Trust Certificates

B: The outstanding balance of the underlying residential mortgage loan pool

Closing Date: June 29, 2010

Legal Final Maturity Date: March 31, 2047

Seller / Servicer: Sumitomo Mitsui Banking Corporation (SMBC)

Asset Trustee: Chuo Mitsui Asset Trust and Banking Company, Limited

Arranger / Private Placement Dealer: Nikko Cordial Securities Inc.

Transaction name: SMBC 21th RMBS Special Purpose Company

JPY 23.0 billion Specified Bonds, rated Aaa

Interest: Fixed

Payment Frequency: Monthly

Closing Date: June 29, 2010

Legal Final Maturity Date: April 25, 2047

Bond Issuer: SMBC 21th RMBS Special Purpose Company

Seller / Servicer: SMBC

Underlying Assets: JPY 23.0 billion Senior Trust Certificates Class A1 (SMBC Residential Mortgage Trust Certificates No.21)

Bond Trustee: The Chuo Mitsui Trust and Banking Company, Limited

Arranger / Dealer: Nikko Cordial Securities Inc.

STRUCTURE

The Seller, SMBC, entrusted a pool of its residential mortgage loans, all related rights and cash to the Asset Trustee. In turn, the Seller received the Senior Trust Certificates (Class A1 and Class A2) and the Subordinated Trust Certificates.

The Seller sold the Senior Trust Certificates Class A1 to SMBC 21th RMBS Special Purpose Company, "the Bond Issuer," and the Senior Trust Certificates Class A2 to investors.

The Bond Issuer issued the fixed-rate Specified Bonds, backed by the Senior Trust Certificates Class A1. The Seller retains the Subordinated Trust Certificates.

SMBC acts as the Servicer, under a servicing agreement with the Asset Trustee.

Principal redemption will be made in a sequential manner. Interest collections (after payment of expenses and dividends) will be transferred to the Principal Account up to the balance of the cumulative defaulted receivables.

The principal and interest collections before the closing date were transferred to the Trustee and the excess spread remains in the Cash Reserve Account.

RATING OPINION SUMMARY

Moody's conducted an on-site meeting with SMBC, focusing on its business franchise as an originator and its underwriting criteria. Moody's also reviewed its operations as a servicer and considers the bank sufficiently capable of servicing the pool.

The loan obligors in the pool consist mainly of salaried workers and civil servants with fairly high and stable incomes. Most of the collateral properties are in the Tokyo or Osaka metropolitan areas.

The interest rates of both asset loans and dividends on the Senior Trust Certificates (interest of the Specified Bonds) are fixed-rate, and there is no risk of cash flow mismatches in the transaction.

After analyzing both obligor attributes and SMBC's historical performance, Moody's estimates a cumulative gross loss rate of 2.8% in the pool.

Moody's believes that the credit enhancement for each of the Class A1 Senior Trust Certificates, the Specified Bonds and the Class A2 Senior Trust Certificates is sufficient for the assignment of a Aaa rating to the transaction.

SELLER / SERVICER

Sumitomo Mitsui Banking Corporation (Chiyoda-ku, Tokyo), the seller / servicer, is a wholly owned subsidiary of Sumitomo Mitsui Financial Group, Inc., a holding company established in 2002. The entity had 22,460 employees and JPY1,771.0 billion in capital as of March 31, 2010.

V SCORES AND PARAMETER SENSITIVITIES

The V Score for this transaction indicates "Low/Medium" uncertainty about critical assumptions, in line with the Low/Medium score for the Japanese RMBS(Conforming) sector.

The V Score reflects 1) the Seller's long track record of residential mortgages, 2) the historically low volatility in its performance, and 3) the disclosure of information for analysis, as well as 4) the characteristics of the transaction.

Moody's also ran sensitivities around key parameters for this transaction. For instance, if the gross loss of 2.8% used in determining the initial rating were changed to 6.0% or 9.0%, the model-indicated rating for the Senior Trust Certificates Class A1 and the Specified Bonds would not be sensitive but the rating for the Senior Trust Certificates Class A2 would change from Aaa to Aa1 and Aa3, respectively.

Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches).

Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time, rather they are designed to provide a quantitative calculation of how the initial rating might change if key input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative / model-indicated standpoint. 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.

The special report "V Scores and Parameter Sensitivities in the Asia/Pacific RMBS Sector" is available on moodys.com.

REFERENCE TO RELEVANT METHODOLOGY

The principal methodology used in rating the transaction was "Moody's Approach to Rating Residential Mortgage-Backed Securities in Japan" (May 2003), which can be found at www.moodys.com in the Research and Ratings directory, in the Rating Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Rating Methodologies subdirectory. Further information on Moody's analysis of this transaction is also available on 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 Investors Service is a publisher of rating opinions and research. It is not involved in the offering or sale of any securities, nor is it acting on behalf of the offering party. This release is not a solicitation or a recommendation to buy, hold or sell securities.

Tokyo
Masayuki Nishida
Vice President - Senior Analyst
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Tokyo
Yasushi Furuya
VP-SCO - Team Leader
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Moody's assigns Aaa to SMBC's 21th RMBS
No Related Data.
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