(The following statement was released by the rating agency)
Jan 15 - Fitch Ratings has affirmed 136 tranches of Dutch prime RMBS. A complete list of rating actions is available at www.fitchratings.com or by clicking on the link above.
The affirmations reflect the stable performance of the collateral despite the deteriorating Dutch housing market with none of the reviewed transactions reporting a reserve fund draw or a principal deficiency ledger (PDL) outstanding. Fitch expects that the current macroeconomic environment may lead to weaker performance of mortgage loans, as well as downward pressure on future house prices (see “Fitch Revises House Price Expectations for the Netherlands” dated 17 December 2012 at www.fitchratings.com).
Transactions backed by the Nationale Hypotheek Garantie (NHG) continue to outperform non-NHG ones. The current pipeline of loans in arrears by more than three months (3m+ arrears) for the NHG transactions remains low at around 0.4% of the current portfolio compared to that for non-NHG transactions which typically stand at 0.8%-1.7%. Cumulative losses remain below 1% of the initial portfolio balance for all transactions.
In Fitch’s view, the recent rise in the level of arrears across Dutch RMBS transactions is mainly driven by an increase in the portion of loans in late stage arrears. The agency believes that the low level of activity in the residential market has made consensual sales more difficult and made the process longer to complete and therefore borrowers are in arrears for a longer period.
The performance to date has remained in line with the rest of the Dutch market with the rise in the level of arrears mainly driven by the rise in the level of late stage arrears (6m+ arrears). As of October 2012, the 6m+ arrears level in Arena 2006-1 and 2007-1 are broadly unchanged in the last year at 0.3% and 0.1% respectively. The levels of credit enhancement remain at sufficient levels and therefore all of the notes have been affirmed.
Beluga Master Issuer
Beluga Master Issuer B.V. is a securitisation programme of Dutch residential mortgages originated by subsidiaries of ABN AMRO Bank N.V. (‘A+'/Stable/‘F1+'). The programme features continuous issuances and purchases of mortgages, with the collateral mainly consisting of mortgage loans to self-employed individuals.
The level of arrears remains amongst the highest in the Dutch prime market with 3m+ arrears as of December 2012 at 1.7% of collateral balance. Despite the weaker performance, the level of credit enhancement available remain sufficient and as such the notes have been affirmed.
The longer time required to foreclose on properties in the Netherlands seems to have been the main driver of the rise in the levels of arrears across the Candide series. As of September 2012, the 6m+ arrears in Candide 2008 and 2008-2 have risen to 0.4% compared with 0.3% and 0.2% respectively 12 months ago.
The levels of cumulative defaults as a percentage of the original pool remain quite limited despite the weaker performance, with realised losses to date covered by the excess spread generated. Fitch considers that the levels of credit enhancement for the rated notes currently remain sufficient for their respective stresses and has affirmed all the notes.
Citadel 2010-I, 2010-II and 2011-I
No defaults, losses or foreclosures have been reported in the series since closing. The servicer, F. Van Lanschot Bankiers N.V. (‘A-'/Negative/‘F2’) had been able to achieve a higher than market average cure rate for arrears by liquidating other valuable assets owned by its clients and tailoring repayment plans for each of its high-net-worth borrowers. The affirmation of the notes reflects the stable performance.
Dutch Mortgage Portfolio Loans (DMPL)
The DMPL series has seen a strong performance during the past year. The level of 3m+ arrears in DMPL VIII, IX and X was 0.3%, 0.3% and 0.2% respectively in October 2012. DMPL IX and X are yet to suffer any losses, while the cumulative losses in DMPL VIII are only 0.01% of the opening collateral portfolio. The series also benefits from a guaranteed excess spread of 0.35% per annum provided by the interest rate swap agreement. The affirmation of the notes is due to the strong performance to date.
Green Apple 2007 and 2008
Although being 100% backed by NHG, Green Apple 2008’s 3m+ arrears have increased to 0.6% in October 2012 compared with 0.3% 12 months ago. Cumulative losses since closing are also increasing but remain low at around 0.2% of the initial pool balance. The weaker performance can be explained by a drop in the cure rate (reported by the originator and servicer Argenta Spaarbank N.V. ) for loans that are four to six months in arrears to 17% in 2012 from 30% in 2010. Despite the weaker performance, the agency feels the credit enhancement levels are sufficient for their respective stresses and has affirmed the notes.
The Holland Homes series features highly seasoned, low LTV loans and continues to be amongst the strongest performers in the Fitch-rated Dutch RMBS portfolio. As of October 2012, Holland Homes 2000-1, 2003-1 and Stichting Holland Homes III had reported no defaults or losses and the 3m+ arrears remained below 0.1% of collateral balance in all three transactions.
As a result of the strong performance, the levels of credit enhancement have remained and the notes have been affirmed.
Lowland MBS No. 1
To date, performance has been stable with the portion of loans in arrears by more than three months standing at only 0.2% of collateral balance as of December 2012. Losses remain limited, with the losses from the four properties foreclosed over the past 12 months provisioned for by the excess spread generated. Given the stable performance, the agency has affirmed the ratings.
Orange Lion Series
The performance of the Orange Lion series remained stable, although there has been a marginal deterioration since the last review. As of the November 2012 IPD, the 3m+ arrears level in Orange Lion IV and V has increased to 0.7% and 0.4%, respectively. Orange Lion VII, which closed in June 2012, had a 3m+ arrears level of 0.2% in the same period. The affirmation of the notes reflects the stable performance to date.
Phedina 2010 and 2011
The Phedina series has performed well in the past 12 months. The 3m+ arrears levels remained below 0.3%. In Fitch’s view, this was achieved by a pro-active arrears management strategy. Novalink, which was appointed by the originator BNP Personal Finance B.V. at closing, contacts borrowers on the first day after a payment is missed and sends a default letter to the borrower after 16 days in arrears. The strong management of the portfolio and the sufficient credit enhancement levels are the main reasons for the affirmation of the notes.
Provide Lowlands 1
In this synthetic transaction, the ratings of the credit-linked notes (CLNs) are reliant on the creditworthiness of KfW. SNS Bank, as the originator of the reference portfolio, buys credit protection from KfW (rated ‘AAA’), which has issued Schuldscheines (certificates of indebtedness) to the issuer.
Performance of the reference portfolio has slightly weakened over the past 12 months with the portion of the portfolio in arrears by more than three months increasing to 0.6% compared with 0.5%. This has resulted in more credit events being declared for which losses have yet to be determined. As of September 2012, the credit events for which losses have yet to be determined stood at EUR3.4m compared with EUR2.8m 12 months ago.
Although the levels of credit enhancement remain sufficient for the respective ratings, in Fitch’s view further house price declines are likely to translate into higher losses for the loans currently subject to a credit event. The revision of the Outlook on the junior class C to Negative reflects these concerns.
Although SAECURE 6 NHG benefits from a guaranteed gross excess spread of 0.15% per annum and good recovery rates, Fitch is concerned that the current macroeconomic environment may lead to higher future losses on properties sold, which may not be fully covered by excess revenue generated by the structure. This view is reflected in the revision of the Outlook to Negative from Stable on the non-collateralised class C notes. The tranche acts as the first loss piece in this deal and is therefore most vulnerable to increased loan losses as house prices continue to fall.
SGML 1 and 2
The SGML series of transactions are fully backed by NHG loans and have performed well in the past 12 months. Fitch notes that the originator and servicer Achmea Hypotheekbank N.V. (AHB, ‘A-'/Stable/‘F2’) has a strong preference for private sales which have historically shown a higher recovery rate, as opposed to public auctions, especially with the NHG loans. Based on the information received from AHB’s total NHG mortgage book, private sales have accounted for over 90% of all sold properties in 2011 compared to 60% in 2007. As a result, the levels of credit enhancement remain sufficient and the notes have been affirmed.
The performance of the Storm series has deteriorated during the past 12 months, but the overall level of performance remains stable. As of November 2012, the level of 3m+ arrears in Storm 2006-I, 2006-II and 2007-1 has risen to between 0.6% - 0.9% compared with 0.4% and 0.6% 12 months ago. Storm 2012-IV closed only in late September 2012 and the 3m+ arrears were 0% at the November 2012 IPD.
Despite the slightly weaker performance, the level of arrears still remain low when compared to other Dutch transaction and as such the notes have been affirmed.
Sound I and II
Performance in both of these 100% NHG transactions has remained stable and manageable despite the marginal increase in the level of arrears. As of October 2012, the level of 3m+ arrears rose to 0.6% and 0.3% in Sound I and II respectively compared with 0.4% and 0.2% 12 months ago. The affirmation of the notes reflects the continued stable performance of the portfolios.
Stichting Uiver 2002
This highly seasoned transaction has performed well during the past 12 months. As of November 2012, the 3m+ arrears were 1.0%, which is an increase of 0.2% since January 2012. The deal has yet to suffer any losses and has amortised significantly to a pool factor of 28%. The affirmation of the notes reflects the stable performance and the strong build-up of credit enhancement as a result of the repayment of the portfolio.
SwAFE 1 has also repaid significantly with a pool factor of 18%. Performance to date has been strong with the 3m+ arrears at 0% and no losses reported throughout the life of the transaction.
The deal structure allows excess spread to pay down the principal on the notes and therefore provide extra credit protection through overcollaterisation. The affirmation of the notes is a result of the strong performance as well as this structural feature.
Link to Fitch Ratings’ Report: Fitch Affirms 136 Tranches of Dutch Prime Transaction