DBRS Rates Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-FM2

Dominion Bond Rating Service (DBRS) has today assigned the following ratings to the Asset-Backed Certificates, Series 2006-FM2 issued by Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-FM2 (the Trust).

- $525.2 million Class I-A-1 rated at AAA
- $280.8 million Class II-A-1 rated at AAA
- $41.3 million Class II-A-2 rated at AAA
- $93.0 million Class II-A-3 rated at AAA
- $12.1 million Class II-A-4 rated at AAA
- $46.1 million Class M-1 rated at AA (high)
- $41.8 million Class M-2 rated at AA
- $25.8 million Class M-3 rated at AA (low)
- $22.1 million Class M-4 rated at A (high)
- $20.9 million Class M-5 rated at A
- $19.0 million Class M-6 rated at A (low)
- $18.4 million Class M-7 rated at BBB (high)
- $16.0 million Class M-8 rated at BBB
- $12.9 million Class M-9 rated at BBB (low)
- $12.9 million Class B-1 rated at BB (high)
- $12.3 million Class B-2 rated at BB

The AAA ratings on the Class A Certificates reflect 22.45% of credit enhancement provided by the subordinate classes, initial overcollateralization (2.25%) and monthly excess spread. The AA (high) rating on Class M-1 reflects 18.70% of credit enhancement. The AA rating on Class M-2 reflects 15.30% of credit enhancement. The AA (low) rating on Class M-3 reflects 13.20% of credit enhancement. The A (high) rating on Class M-4 reflects 11.40% of credit enhancement. The “A” rating on Class M-5 reflects 9.70% of credit enhancement. The A (low) rating on Class M-6 reflects 8.15% of credit enhancement. The BBB (high) rating on Class M-7 reflects 6.65% of credit enhancement. The BBB rating on Class M-8 reflects 5.35% of credit enhancement. The BBB (low) rating on Class M-9 reflects 4.30% of credit enhancement. The BB (high) rating on Class B-1 reflects 3.25% of credit enhancement. The BB rating on Class B-2 reflects 2.25% of credit enhancement.

The ratings of the certificates also reflect the quality of the underlying assets and the capabilities of Equity One, Inc. as Servicer, as well as the integrity of the legal structure of the transaction. HSBC Bank USA, National Association will act as Trustee. The Trust will enter into an interest rate swap agreement with HSBC Bank USA, National Association (the Swap Provider). The Trust will pay to the Swap Provider a fixed payment of 5.25% per annum in exchange for a floating payment at LIBOR from the Swap Provider. In addition, the certificate holders will receive the benefits of an interest rate cap agreement with HSBC Bank USA, National Association with a strike rate ranging from 7.704% to 9.552%.

Interest and principal payments collected from the mortgage loans will be distributed on the 25th day of each month commencing in November 2006. Interest will be paid first to the Class A certificates on a pro rata basis and then sequentially to the subordinate certificates. Principal collected will be paid exclusively to the Class A certificates until the step-down date unless each of such classes has been paid down to zero. After the step-down date, and provided that certain performance tests have been met, principal payments may be distributed to the subordinate certificates. Additionally, provided that certain performance tests have been met, the level of overcollateralization may be allowed to step down to 4.50% of the then-current balance of the mortgage loans.

The mortgage loans in the Underlying Trust were originated by Fremont Investment & Loan. As of the cut-off date (October 1, 2006), the aggregate principal balance of the mortgage loans is $1,228,042,345. The weighted average mortgage coupon is 8.452%, the weighted average FICO is 628 and the weighted average original loan-to-value ratio is 81.25%, without taking into consideration the combined loan-to-value on the piggybacked loans.

Note:
All figures are in U.S. dollars unless otherwise noted.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

Ratings

Back to top