April 20, 2017 / 4:02 PM / 4 months ago

Fitch Takes Rating Action on Three Storm Transactions

(The following statement was released by the rating agency) LONDON, April 20 (Fitch) Fitch Ratings has affirmed 11 tranches of Storm 2012-IV B.V., Storm 2012-V B.V. and Storm 2013-I B.V. and upgraded one tranche of Storm 2013-I B.V. as follows: 2012-IV Class A2 (ISIN: XS0815105472) affirmed at 'AAAsf'; Outlook Stable Class B (ISIN: XS0815105985) affirmed at 'AAsf'; Outlook Stable Class C (ISIN: XS0815106108) affirmed at 'A-sf'; Outlook Stable Class D (ISIN: XS0815106520) affirmed at 'BB+sf'; Outlook Stable 2012-V Class A (ISIN: XS0835845560) affirmed at 'AAAsf'; Outlook Stable Class B (ISIN: XS0835850560) affirmed at 'AAsf'; Outlook Stable Class C (ISIN: XS0835858118) affirmed at 'A-sf'; Outlook Stable Class D (ISIN: XS0835859272) affirmed at 'BB+sf'; Outlook Stable 2013-I Class A2 (ISIN: XS0871785019) affirmed at 'AAAsf'; Outlook Stable Class B (ISIN: XS0871785282) affirmed at 'AAsf'; Outlook Stable Class C (ISIN: XS0871785365) affirmed at 'A-sf'; Outlook Stable Class D (ISIN: XS0871785449) upgraded to 'BB+sf' from 'BBsf'; Outlook Stable KEY RATING DRIVERS Stable Performance The Storm transactions (issued since 2012) have generally outperformed the market, with late-stage arrears (loans in arrears by more than three months) at 32bp (Storm 2012-IV), 24bp (Storm 2012-V) and 23bp (Storm 2013-I) of their respective current portfolio balances compared with Fitch's index of 29bp. Foreclosures as a proportion of the original portfolio balance remain low at: 76bp in Storm 2012-IV; 70bp in Storm 2012-V; and 56bp in Storm 2013-I. These levels are also well below Fitch's index for all Dutch transactions, which is at 116bp. No Credit to NHG loans The portfolios contain small amounts of NHG loans (2.4% in 2012-IV, 4.8% in 2012-V and 3.1% in 2013-I). Based on historical NHG loan performance information made available to Fitch, for loans originated between 2007 and 2010, NHG loan defaults were higher than non-NHG loan defaults. Therefore, in this analysis no credit was given to NHG loans in the derivation of the foreclosure frequency of the portfolios. Data received from WEW on recoveries for claims made under the NHG scheme, resulted in Fitch applying a compliance ratio of 85% across all rating scenarios, in line with criteria. Interest-only (IO) concentration All three transactions contain significant portions of IO loans (between 67.7% and 74.5% of the current portfolio balance), with 33.2% (Storm 2012-IV), 32.8% (Storm 2012-V) and 26.6% (Storm 2013-I) maturing between 2036 and 2038. In its analysis of the IO concentration, Fitch applied foreclosure frequencies described in its criteria addendum. The application of these IO concentration foreclosure frequency assumptions led to model implied ratings that are more than three notches lower than those derived using standard assumptions for Storm 2012-IV and 2012-V. As a result, the rating analysis for these two transactions is based on the IO concentration foreclosure frequencies. Front-loaded Default Curve for PAF Fitch has received historical data on foreclosure data for Obvion's total book. The data suggests that most of the defaults occur in the first three to seven years since loan origination, which is in line with Fitch's front-loaded default curve. As a result, in its calculation of the performance adjustment factor, Fitch used the front-loaded default curve. Guaranteed Excess Spread The transactions feature swap agreements with Rabobank, according to which excess spread of 50bp is guaranteed. Given the low levels of arrears and foreclosures, these funds have been used towards the redemption of the uncollateralised notes in all three transactions. Insurance Set-Off Risk 5.6% of 2012-IV, 5.7% of 2012-V and 4.7% of 2013-I comprise loans with life insurance payment vehicles attached. Upon insolvency of the insurance provider there is a risk that the borrowers may try to set-off their insurance claim against the lender. Fitch accounts for this risk by assuming a capital build-up over 30 years and then analysing the effect of a combined default of the insurance providers, factoring in the affiliation of the insurance provider to the original lender. The most stressful scenarios were assessed and the maximum exposure resulting from this calculation is incorporated in the net loss rate derived for the various rating levels in Fitch's surveillance model. The insurance set-off exposure was found to have a minimal effect on the rating outcome. Credit Enhancement Build-up Amortisation in all three transactions is fully sequential. With average prepayments at 11% across the three transactions, the portfolios currently stand at between 73.8% and 77.4% of their original balance. This has led to a build-up in the credit enhancement available to the rated tranches, which in combination with the sound performance of the deals, led to an upgrade on the class D note of Storm 2013-I to 'BB+sf'. RATING SENSITIVITIES Adverse macroeconomic factors may affect asset performance. An increase in foreclosures and losses beyond Fitch's stresses may erode credit enhancement leading to negative rating actions. High prepayments may lead to changes in the volume of IO loans and concentrations of such loans maturing within a three year period. This will have an effect on the weighted average foreclosure frequencies derived for these pools, which may ultimately lead to rating changes. Fitch rates to legal final maturity. At the call option date, as per transaction documentation, the class B to D notes can be called net of PDL. Occurrence of material principal shortfalls in Fitch's cash flow analysis over the life of the transactions may trigger rating actions. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 No third-party due diligence was provided or reviewed in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Prior to closing, Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis. Prior to the transactions' closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall and together with the assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis. -Loan-by-loan data provided by the European Data Warehouse as at 31 January 2017 and 31 December 2016. -Transaction reporting provided by Intertrust Administrative Services B.V. as at 22 February 2017 and 23 January 2017. MODELS The models below were used in the analysis. Click on the link for a description of the model <a href="https://www.fitchratings.com/jsp/creditdesk/ToolsAndModels.faces?context=2 &detail=135"> ResiEMEA. <a href="https://www.fitchratings.com/web_content/pages/rmbs/emea-rmbs-surveillance -model.htm"> EMEA RMBS Surveillance Model. <a href="https://www.fitchratings.com/web_content/pages/sf/emea-cash-flow-model.htm ">EMEA Cash Flow Model. Contacts: Lead Surveillance Analyst Samarth Bhasin, CFA Associate Director +44 20 3530 1669 Fitch Ratings Limited 30 North Colonnade London E14 5GN Committee Chairperson Sanja Paic, CFA Senior Director +44 20 3530 1282 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Criteria Addendum: Netherlands - Residential Mortgage Assumptions (pub. 11 Nov 2016) here EMEA RMBS Rating Criteria (pub. 29 Nov 2016) here Global Structured Finance Rating Criteria (pub. 27 Jun 2016) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 20 Mar 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 20 Mar 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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