Fitch Affirms Douro Mortgages Series
The three transactions comprise loans originated and serviced by Banco BPI (BB/Stable/F1).
KEY RATING DRIVERS
The transactions continue to report a limited volume of loans in arrears by three months or more. As of the latest payment date, late-stage arrears range from 0.3% (Douro 2) to 0.5% (Douro 1) of the current portfolio balance, which is well below the 1.0% Portuguese RMBS average for three-month plus arrears.
The transactions feature a provisioning mechanism, whereby excess spread is diverted to principal distributions to cover deemed principal losses. The amount provisioned is dependent on the number of monthly instalments in arrears.
To account for the staggered nature of provisions, Fitch has estimated the volume of loans that have defaulted, but for which full provisions have not yet been made. These amounts make up between 0.2% (Douro 1) to 0.5% (Douro 3) of the current portfolio balance. They have been deducted from the available credit enhancement in Fitch's analysis, as these provisions will only be made in the coming quarters.
Banco BPI has continued to post collateral in relation to the swap in Douro 1. Due to the recent downgrade of Banco BPI to 'BB'/Stable/'B', Fitch no longer views the posting of collateral as a sufficient mitigant to the exposure to support notes rated in the 'Asf' category. Therefore Fitch has disregarded the effect of the swap and applied a haircut to the excess spread in its analysis to account for the exposure to basis risk.
Deterioration in asset performance may result from economic factors. A corresponding increase in new defaults and associated pressure on excess spread levels and reserve funds beyond Fitch's assumptions could result in negative rating action.
The ratings are also sensitive to changes to Portugal's Country Ceiling (A+) and, consequently, changes to the highest achievable rating of Portuguese structured finance notes.
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 pools and the transactions. 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
The information below was used in the analysis.
- Loan-by-loan data provided by European Data Warehouse as at 30 June, 31 July and 31 August 2015 for Douro 2, 3 and 1, respectively
- Transaction reporting provided by Banco BPI as at 29 May, 30 June and 31 July 2015 for Douro 1, 2 and 3, respectively
- Recovery information provided by Banco BPI as at 14 July 2015
The rating actions are as follows:
Douro Mortgages No. 1:
Class A (ISIN XS0236179270): affirmed at 'A+sf'; Outlook Stable
Class B (ISIN XS0236179601): affirmed at 'Asf'; Outlook Stable
Class C (ISIN XS0236180104): affirmed at 'BBBsf'; Outlook Stable
Class D (ISIN XS0236180443): affirmed at 'BBsf'; Outlook Stable
Douro Mortgages No. 2:
Class A1 (ISIN XS0269341334): affirmed at 'Asf'; Outlook Stable
Class A2 (ISIN XS0269341680): affirmed at 'Asf'; Outlook Stable
Class B (ISIN XS0269343389): affirmed at 'BBBsf'; Outlook Stable
Class C (ISIN XS0269343892): affirmed at 'BBsf'; Outlook Stable
Class D (ISIN XS0269344197): affirmed at Bsf'; Outlook Stable
Douro Mortgages No. 3:
Class A (ISIN XS0311833833) affirmed at 'BBB+sf'; Outlook Stable
Class B (ISIN XS0311834211) affirmed at 'BB+sf'; Outlook Stable
Class C (ISIN XS0311835374) affirmed at 'BBsf'; Outlook Stable;
Class D (ISIN XS0311836349) affirmed at 'Bsf'; Outlook Stable.