OREANDA-NEWS. Fitch Ratings has affirmed Dreams Funding Corporation's notes. The transaction is a securitisation of residential mortgage loan receivables, including those backed by residential properties for rent. The receivables were originated by the former Daihyaku Mutual Life Insurance Company. The rating actions are listed below.

JPY0.23bn* Class A2 notes affirmed at 'AAAsf'; Outlook Stable
JPY3.70bn* Class L2 notes affirmed at 'AAAsf'; Outlook Stable
JPY6.50bn* Class L3 notes affirmed at 'AAAsf'; Outlook Stable
JPY0.74bn* Class M2 notes affirmed at 'Asf'; Outlook Stable
* as of 20 January 2015

KEY RATING DRIVERS

The affirmations reflect Fitch's view that available credit enhancement (CE) provides sufficient protection to support the current ratings against potential deterioration in the pool's performance, a decline in excess spread and an increase in basis risk.

The performance of the underlying pool has been in line with the agency's expectation since the previous rating action in February 2014.

Given the low interest rate environment in Japan, Fitch expects the interest rates on the underlying pool to continue to remain at the current low level, which may lead to slight negative carry in the next one to two years. However, the effect on the transaction is expected to be minimal as amounts would be small and covered by the reserve fund.

Japan's 'A+' Long-Term and 'F1+' Short-Term Issuer Default Ratings were placed on Rating Watch Negative on 9 December 2014; however, this has had no immediate impact on the ratings of this transaction. For further information, please see Fitch's commentary titled "No Immediate Impact on Japanese SF Ratings from Sovereign Action", dated 12 December 2014.

RATING SENSITIVITIES

An unexpected material increase in delinquencies, defaults and loss severities from defaulted loans in the underlying pool may lead to negative rating actions. The credit enhancement levels for the 'AAAsf' rated notes can support defaults at least three times higher than assumed in Fitch's 'AAAsf' stress scenario. The credit enhancement levels for the 'Asf' rated notes can support defaults at least four times higher than assumed in Fitch's 'Asf' stress scenario.

Since a substantial portion of the CE is provided by the cash reserve, there is significant exposure to the issuer account bank. Therefore, the ratings of the class M2 notes are unlikely to be upgraded in the foreseeable future.