Fitch Downgrades 14 Tranches of 5 Spanish RMBS Deals
KEY RATING DRIVERS
Deteriorated Asset Performance
The underlying pools of the TDA transactions are partially backed by loans originated by Credifimo, a specialised lender targeting mainly non-prime low income borrowers. Exposure to these loans constitutes the main driver for the weak performance of the transactions. As of the latest reporting dates, cumulative gross defaults range from 8.0% (Santander Hipotecario 3 as of July 2016) to 28.8% (TDA 28 as of June 2016), up from between 7.6% (Santander Hipotecario 3 as of July 2015) and 28.0% (TDA 28 as of June 2015). These numbers are above Fitch's Index of 5.6%. We expect cumulative defaults to continue to rise as further loans roll to default.
Fitch believes that the larger exposure to Credifimo loans in TDA 25 and 28, at 82% and 37% of the respective current pool balance, suggests that the performance will remain particularly weak as reflected by the downgrades.
Large Deficiency Ledgers
The outstanding principal deficiency ledgers (PDL) remain high, at between EUR23.2m (TDA 24 as of June 2016) and EUR180m (Santander Hipotecario 3 as of July 2016), compared with EUR23.4m (TDA 24 as of June 2015) and EUR186.9m (Santander Hipotecario 3 as of July 2015). As a result, available excess spread and enforcement proceeds are key elements for the repayment of the notes. This is reflected in the affirmation of the 16 tranches and the downgrade of the junior notes of TDA 24, TDA 27 and Santander Hipotecario 3 as well as the downward revision of the Recovery Estimate (RE) of TDA 27.
Given the growing dependency to the recovery inflows, any change to the recovery income below that of Fitch's stresses would trigger negative rating action or revision of the Recovery Estimates.
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.
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.
Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
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
Investor and servicer reports provided by Titulizacion de Activos since close and until:
-June 2016 for TDA 24, 25 and 27
-July 2016 for TDA 28
Investor and servicer reports provided by Banco Santander since close and until:
-July 2016 for Santander Hipotecario 3
Loan-by-loan data provided by Banco Santander and sourced from the European Data Warehouse with a cut-off date of July 2016 for Santander Hipotecario 3
Loan-by-loan data provided by Titulizacion de Activos with a cut-off date of:
-May 2016 for TDA 24, 25 and 27
-March 2016 for TDA 28