(The following statement was released by the rating agency)
Jan 15 - Fitch Ratings has assigned Dutch MBS XVIII B.V.’s EUR526.5m mortgage-backed notes expected ratings, as follows:
EUR140,000,000 floating-rate class A1 mortgage-backed notes: ‘AAAsf(EXP)'; Outlook Stable
EUR360,000,000 floating-rate class A2 mortgage-backed notes: ‘AAAsf(EXP)'; Outlook Stable
EUR8,000,000 floating-rate class B mortgage-backed notes: ‘AA+sf(EXP)'; Outlook Stable
EUR7,000,000 floating-rate class C mortgage-backed notes: ‘A+sf(EXP)'; Outlook Stable
EUR7,000,000 floating-rate class D mortgage-backed notes: ‘BBBsf(EXP)'; Outlook Stable
EUR4,500,000 floating-rate class E mortgage-backed notes: ‘Bsf(EXP)'; Outlook Stable
EUR2,700,000 floating-rate non-collateralised class F notes: ‘NRsf(EXP)’
The transaction is a true sale securitisation of Dutch residential mortgage loans, originated in the Netherlands and owned by NIBC Bank N.V. (NIBC, ‘BBB’/Negative/‘F3’). The expected ratings are based on Fitch’s assessment of the underlying collateral, available credit enhancement (CE), the origination and underwriting procedures used by the seller, the servicing capabilities of NIBC, STATER Nederland and Quion Groep B.V. and the transaction’s sound legal structure.
The transaction is backed by a nine-year seasoned non-revolving portfolio of prime residential mortgage loans, with a relatively low weighted-average original loan-to-market-value of 78.2% and a debt-to-income ratio of 28.7%. The purchase of further advances into the pool will not be allowed after closing
CE for the class A notes will initially total 5.5%, which is provided by the subordination of the class B notes (1.5%), the class C notes (1.3%) the class D notes (1.3%), the class E notes (0.9%) and the reserve account (0.50%). The transaction benefits from a fully funded non-amortising reserve account equating to 0.5% of the initial class A to E notes balance and a cash advance facility equating to 1.5% of the outstanding class A to E notes balance, which may amortise to 0.75% of the initial class A to E notes’ balance. Under the interest rate swap agreement, the swap counterparty pays the interest on the notes in exchange for the scheduled interest on the mortgages, interest earned on the guaranteed investment contract account, less senior fees and excess spread of 0.5%.
The collateral review of the mortgage portfolio involved reviewing vintage performance data and loan-by-loan loss severity information on the originator’s sold repossessions, which Fitch used to validate the frequency of foreclosure assumptions, quick sale adjustments and foreclosure timing assumptions used within its analysis. Whilst NIBC was unable to provide cumulative default data by vintage, it provided static three-months plus arrears data by vintage for both NHG and non-NHG loans and loan-by-loan repossession data on all loans foreclosed over the past few years. This data was in line with Fitch’s performance assumptions for the Dutch market and consequently no additional adjustments to the standard assumptions were made.
To analyse the CE levels, Fitch evaluated the collateral using its default model, details of which can be found in the reports entitled “EMEA Residential Mortgage Loss Criteria”, dated 7 June 2012, and “EMEA RMBS Criteria Addendum - Netherlands”, dated 14 June 2012, at www.fitchratings.com. The agency assessed the transaction cash flows using default and loss severity assumptions under various structural stresses including prepayment speeds and interest rate scenarios. The cash flow tests showed that each class of notes could withstand loan losses at a level corresponding to the related stress scenario without incurring any principal loss or interest shortfall and can retire principal by the legal final maturity
In Fitch’s view, commingling risk is minimal due to the use of a foundation structure. Consequently, the agency did not consider the risk of a loss of funds due to commingling or disruption of payments in its cash flow analysis. The transaction is not exposed to the risk of deposit set-off or other claims. Fitch incorporated in its analysis the risk that borrowers might exercise set-off following the failure of insurance providers.
Fitch’s stress and rating sensitivity analysis is detailed in the presale report, which will shortly be available at www.fitchratings.com.
Link to Fitch Ratings’ Report: Dutch MBS XVIII B.V.