Fitch Affirms DMPL XII; Outlook Stable
OREANDA-NEWS. Fitch Ratings has affirmed Dutch Mortgage Portfolio Loans XII B.V. (DMPL XII). The transaction is a securitisation of Dutch prime residential mortgages originated by Achmea Hypotheekbank N.V. (AHB, A/Negative/F2), primarily prior to 2005.
Fitch has taken the following rating actions:
Class A1 (NL0010773867) affirmed at 'AAAsf'; Outlook Stable
Class A2 (NL0010773875) affirmed at 'AAAsf'; Outlook Stable
Class B (NL0010773883) affirmed at 'BB-sf'; Outlook Stable
KEY RATING DRIVERS
Stable Asset Performance
As the transaction closed just under two years ago, there is limited observable asset performance data. As of end-March 2016 late-stage arrears (loans in arrears for more than three months) were 0.16% of the current portfolio balance compared with the average of 0.23% for the 2014 Fitch-rated Dutch RMBS. The transaction has also shown lower arrears than levels observed in other DMPL transactions at similar point of seasoning. The positive asset performance was reflected in fairly lower weighted average foreclosure frequency (FF) figures at closing.
Within the underlying loans, 8.8% are provided to employees of Achmea Interne Diensten, an operating subsidiary of Achmea B.V., the insurance parent of AHB. Legal opinion has confirmed that while these employees effectively work for AHB, set-off risk is unlikely as AHB and Achmea Interne Diensten are legally separate entities. Therefore, the risk of employees setting-off claims against their employer (e.g. severance pay, pension etc) in the event of AHB's default is considered minimal and not factored into the analysis.
It should be noted that in line with its criteria, Fitch has increased the FF for employee loans by 20%.
Borrowers with insurance repayment vehicles may, in the case of the insurance provider's insolvency, attempt to set-off their claim over the provider against the mortgage. Fitch has factored in potential losses alongside the probability of set-off in the analysis of this transaction.
The senior notes are hedged by a margin-guaranteed swap provided by Deutsche Bank (A-/Stable/F1), which generates excess spread of 35bps on the class A notes.
While the swap terminates upon pay-down or redemption of the class A notes, the class B notes (paying fixed rate) are naturally hedged as 85% of the portfolio consists of fixed-rate loans.
A large portion of borrowers are marked as having 'Other' employment, which is inconsistent with the employment type previously observed. In line with its criteria, Fitch has taken a conservative approach and has increased the FF of these loans by 20%. The adjustment does not have an impact on the rating outcome.
Deutsche Bank in its capacity as swap counterparty is currently posting collateral as it is in breach of its rating trigger. The amount of collateral posted is broadly in line with Fitch criteria and the discrepancy between the actual amount posted and the required amount is considered immaterial.
Adverse macroeconomic trends may have an impact on employment as well as the housing market. Poorer asset performance may erode available credit enhancement, which in turn may lead to negative rating actions.
Movement in collateral values may have implications on the required credit enhancement for senior rating levels.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
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 the transaction 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 transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found inconsistencies or missing data related to the employment data and discounts on loans made to employees. These findings were accounted for in this analysis by assuming a specific lender adjustment.
Overall, 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 2016
-Transaction reporting provided by Intertrust as at 26 February 2016 and 29 March 2016
-Discussions/updates from originator/servicer dated 17 May 2016.