OREANDA-NEWS. August 31, 2015. Fitch Ratings has affirmed the ratings of 40 tranches in eight DTC transactions. The Outlooks on all tranches are Stable. The transactions are securitisations of mortgage loans backed by multi-family apartment properties. A full rating breakdown is at the end of this commentary.

KEY RATING DRIVERS
The affirmations reflect Fitch's view that available credit enhancement (CE) levels are sufficient to support the current ratings. The master lease structure in place for the collateral properties contributes to stable loan performance, and for each of the eight transactions, delinquencies and defaults have been limited to date. Fitch expects this trend to continue.

Fitch considers the cash flow performance of the collateral properties to be moderately below the agency's initial assumptions due to a decline in rent income. This has led Fitch to increase its net loss assumptions for each underlying pool in stressed scenarios. However, this has been offset by improved CE levels.

Payments for the class N notes of DTC Eight are mainly derived from excess spread and prepayment fees. Loan prepayment backing this transaction has been faster than Fitch's initial expectations, leading to the compression of excess spread. However, this risk is mitigated by the stable loan pool performance as no loan from this transaction has defaulted to date.

Six transactions, other than DTC Three and Eight, have exposure to a Japanese counterparty that is not eligible as account bank, which undermines support for their 'AAAsf' ratings. However, Fitch's analysis takes into account the sufficient protection via their available liquidity mechanism and CE levels against their exposure to such a counterparty (A-/Stable/F1).

RATING SENSITIVITIES
An unexpected increase in the delinquency or default rate may lead to higher loss assumption, which may, in turn, affect the ratings of the notes. However, the possibility of downgrade for the senior notes of DTC One to Three, especially for the class A notes, is considered remote due to significant progress of the sequential principal repayment. The 'AAAsf' rated notes of the other transactions can be supported even if assumed property cash flows decline by less than the agency's initial assumption of around 20%.

For DTC Three and DTC Eight, Fitch continues to believe that these transactions have available cash reserves to address liquidity risk in the absence of an eligible advancing agent. This view is based on the expected stable performance of the underlying loan pools, note amortisation and a low interest rate environment in Japan. Therefore, an unexpected increase in interest rates may lead to negative rating action on these transactions.

DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to these rating actions.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the underlying pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the underlying pools information or conducted a review of loan origination files as part of its ongoing monitoring.

The full list of rating actions is as follows.

DTC One Special Purpose Company:
JPY26m Class A-1 notes affirmed at 'AAAsf'; Outlook Stable
JPY0.23bn Class A-2 notes affirmed at 'AAAsf'; Outlook Stable
JPY1m Class A-3 notes affirmed at 'AAAsf'; Outlook Stable
JPY0.32bn Class B notes affirmed at 'AAsf'; Outlook Stable
JPY0.18bn Class C notes affirmed at 'Asf'; Outlook Stable
JPY0.32bn Class D notes affirmed at 'BBBsf'; Outlook Stable
JPY0.35bn Class E notes affirmed at 'BBsf'; Outlook Stable

DTC Two Funding Limited:
JPY0.26bn Class A notes affirmed at 'AAAsf'; Outlook Stable
JPY0.47bn Class B notes affirmed at 'AA+sf'; Outlook Stable
JPY0.28bn Class C notes affirmed at 'A+sf'; Outlook Stable
JPY0.38bn Class D notes affirmed at 'BBBsf'; Outlook Stable
JPY0.85bn Class E notes affirmed at 'BBsf'; Outlook Stable
JPY1.39bn Class J notes affirmed at 'BBBsf'; Outlook Stable

DTC Three Funding Limited:
JPY0.92bn Class A-1 notes affirmed at 'AAAsf'; Outlook Stable
JPY0.63bn Class A-2 notes affirmed at 'AAAsf'; Outlook Stable
JPY0.87bn Class B notes affirmed at 'AAsf'; Outlook Stable
JPY0.54bn Class C notes affirmed at 'Asf'; Outlook Stable
JPY0.69bn Class D notes affirmed at 'BBBsf'; Outlook Stable
JPY0.78bn Class E notes affirmed at 'BBsf'; Outlook Stable

DTC Four Funding Limited:
JPY2.98bn Class A-1 notes affirmed at 'AAAsf'; Outlook Stable
JPY1.49bn Class A-2 notes affirmed at 'AAAsf'; Outlook Stable
JPY0.37bn Class B notes affirmed at 'AAsf'; Outlook Stable
JPY0.37bn Class C notes affirmed at 'Asf'; Outlook Stable
JPY0.29bn Class D notes affirmed at 'BBBsf'; Outlook Stable
Class E notes were paid in full in March 2015.

DTC Five Funding Limited:
JPY4.5bn Class A notes affirmed at 'AAAsf'; Outlook Stable
JPY0.38bn Class B notes affirmed at 'AAsf'; Outlook Stable
JPY0.38bn Class C notes affirmed at 'Asf'; Outlook Stable
JPY0.32bn Class D notes affirmed at 'BBBsf'; Outlook Stable
Class E notes were paid in full in May 2015.

DTC Six Funding Limited:
JPY5.45bn Class A notes affirmed at 'AAAsf'; Outlook Stable
JPY0.45bn Class B notes affirmed at 'AAsf'; Outlook Stable
JPY0.47bn Class C notes affirmed at 'Asf'; Outlook Stable
JPY0.25bn Class D notes affirmed at 'BBBsf'; Outlook Stable

DTC Seven Funding Limited:
JPY5.67bn Class A notes affirmed at 'AAAsf'; Outlook Stable
JPY0.75bn Class B notes affirmed at 'AAsf'; Outlook Stable
JPY0.63bn Class C notes affirmed at 'Asf'; Outlook Stable
Class D notes were paid in full in August 2015.

DTC Eight Funding Limited:
JPY6.97bn Class A notes affirmed at 'AAAsf'; Outlook Stable
JPY0.83bn Class B notes affirmed at 'AAsf'; Outlook Stable
JPY0.76bn Class C notes affirmed at 'Asf'; Outlook Stable
JPY0.43bn Class D notes affirmed at 'BBBsf'; Outlook Stable
JPY0.18bn Class N notes affirmed at 'BBBsf'; Outlook Stable

All tranche balances are as of 27 August 2015.