Fitch Affirms 5 AyT RMBS Deals
The transactions are part of a series of RMBS transactions that are serviced by: Kutxabank, S.A. (Kutxabank; BBB/Positive/F3) for AyT CGH BBK I and AyT CGH BBK II, Bankia S.A. (Bankia; BB/Positive/B) for AyT CGH Caixa Laietana I and Banco Mare Nostrum S.A (BMN; BB/Stable/B) for AyT CGH Caja Granada and AyT Caja Murcia Hipotecario II.
KEY RATING DRIVERS
Stable Credit Enhancement (CE)
The notes in AyT CGH Caja Granada, AyT CGH Caixa Laietana I, AyT CGH BBK I and AyT CGH BBK II are currently paying sequentially. As delinquencies are above the trigger levels we do not expect a switch to pro-rata in the near future. Fitch considers the existing and projected CE as sufficient to support the ratings, as reflected in their affirmation and the revision of the Outlook on two tranches to Stable from Negative.
For AyT Murcia Hipotecario II, the stable performance has led to a switch to pro-rata amortisation. As delinquencies remain low and the reserve fund is currently at its target, a reversal to sequential is not expected.
Stable Arrears Performance
AyT CGH Caja Granada and AyT CGH Caixa Laietana I have shown weaker asset performance compared with other Spanish transactions. The level of three-months plus arrears (excluding defaults) as a percentage of the current pool balance was 2.0% and 3.5%, respectively. Although these numbers are decreasing, they remain significantly above Fitch's prime index of three-months plus arrears (excluding defaults) of 1.0%.
The remaining deals continue to show stable asset performance. As of the latest reporting periods, three-months plus arrears (excluding defaults) ranged from 0.7% (AyT Murcia Hipotecario II) to 1% (AyT CGH BBK I) of the current pool balances. These levels remain in line with the Fitch Spanish Prime index.
Cumulative defaults, defined as mortgages in arrears by more than 18 months, are currently below the average for the sector, but have increased sharply in recent periods in both AyT CGH Caja Granada and AyT CGH Caixa Laietana I. Given the high level of late stage arrears in both deals, Fitch notes further increases in gross cumulative defaults may be possible.
Excess spread has not always been sufficient recently for default provisioning purposes, which resulted in some reserve fund draws during 2015. As of the last payment date, the reserve funds were at 82.5%, 52.2% and 0% of their target for AyT CGH BBK II, AyT CGH Caixa Laietana I and AyT CGH Caja Granada, respectively. In contrast, AyT Murcia Hipotecario II and AyT CGH BBK I have fully funded reserve funds.
High Mortgage Prepayments
Both AyT CGH Caja Granada (40.3% per year) and AyT CGH Caixa Laietana I (10.6% per year) have reported high mortgage prepayments, significantly above the market average (4.3% per year). As these rates are not consistent with the current macroeconomic environment and levels observed in the market, Fitch cannot rule out the possibility that some prepayments are the result of originator support for troubled borrowers by means of refinancing. If refinancing in such circumstances has been offered in the past, it may not be sustained indefinitely, which could translate into further defaults.
Payment Interruption Risk
Although the swap documents enable deferral of the swap payments, Fitch considers the reserve fund insufficient to sustain ratings above the 'Asf' category for AyT CGH Caixa Laietana I given the absence of other liquidity means to cover for payment interruption.
For AyT CGH Caja Granada and AyT Murcia Hipotecario II, dynamic cash reserves are sized to cover for one and two payment dates worth of interest on tranche A and senior fees, respectively. However, for AyT CGH Caja Granada, Fitch considers the cash reserves combined with the fully utilised reserve funds insufficient to fully cover payment interruption risk. Swap payment deferral is possible for AyT Caja Granada but the ratings will not be upgraded above 'Asf' as long as payment interruption risk is not fully mitigated. In the case of AyT Murcia Hipotecario II, Fitch considers the risk to be sufficiently mitigated.
For AyT CGH BBK I Fitch found the amortising reserve fund insufficient to fully mitigate payment interruption. Consequently, the ratings will not be upgraded above 'Asf' as long as payment interruption risk is not fully mitigated. For AyT CGH BBK II, Fitch considers the risk to be sufficiently mitigated.
Absence of Hedging
Fitch believes the removal of the swap and use of fixed interest rate coupons in both AyT CGH BBK I and BBK II introduces a basis risk to the transactions, which we have factored into the analysis. Nevertheless, the agency considers the available CE sufficient to withstand the resulting stresses.
Fitch believes the transactions are exposed to a commingling loss of more than 50% of the monthly collections in the event of default of the collection account bank. This is based on information provided by the servicers regarding borrower payment distribution, which indicates payments are concentrated in few particular dates of every month for AyT CGH Caixa Laietana I and AyT CGH Caja Granada. Fitch also considers there is commingling loss exposure in the remaining deals as there is no certainty regarding the timely cessation of further payments into the commingled accounts. The agency has captured this additional stress in its analysis and found the current CE is sufficient to mitigate the risk.
Based on information provided by the servicers Fitch found that some borrowers in all transactions have been offered maturity extensions to their loans. Fitch considers this signals a weaker borrower profile and has increased the foreclosure frequency for these loans. The agency found the current CE is sufficient to mitigate the risk.
A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift of interest rates could jeopardise the underlying borrowers' affordability.
The ratings are also sensitive to changes to Spain's Country Ceiling (AA+) and, consequently, changes to the highest achievable rating of Spanish structured finance notes (AA+sf).
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 obtained from the European Data Warehouse with a cut-off date of:
17/12/2015 for AyT CGH Caixa Laietana I
30/01/2016 for AyT CGH BBK I and II
13/11/2015 for AyT CGH Caja Granada
30/09/2015 for AyT Caja Murcia Hipotecario II
Transaction reporting provided by Haya Titulizacion since close and until:
September 2015 for AyT CGH Caixa Laietana I and AyT CGH BBKI
November 2015 for AyT CGH Caja Granada
December 2015 for AyT CGH BBK II
January 2016 for AyT Caja Murcia Hipotecario II
The model below was used in the analysis. Click on the link for a description of the model.
EMEA RMBS Surveillance Model.
The rating actions are as follows:
AyT CGH Caixa Laietana I:
Class A notes (ISIN ES0312273487): affirmed at 'A+sf'; Outlook Stable
Class B notes (ISIN ES0312273495): affirmed at 'BBBsf'; Outlook revised to Stable from Negative
Class C notes (ISIN ES0312273503): affirmed at 'BBsf'; Outlook Negative
Class D notes (ISIN ES0312273511): affirmed at 'CCCsf'; RE 55%
AyT CGH Caja Granada:
Class A notes (ISIN ES0312273164): affirmed at 'A-sf'; Outlook revised to Stable from Negative
Class B notes (ISIN ES0312273172): affirmed at 'Bsf'; Outlook Negative
Class C notes (ISIN ES0312273180): affirmed at 'CCCsf'; RE 50%
Class D notes (ISIN ES0312273198): affirmed at 'CCsf'; RE 0%
AyT CGH BBK I
Class A notes (ISIN ES0312273008): affirmed at 'A-sf'; Outlook Stable
AyT CGH BBK II
Class A notes (ISIN ES0312273362): affirmed at 'AA-sf'; Outlook Stable;
Class B notes (ISIN ES0312273370): affirmed at 'BBBsf'; Outlook Stable
AyT Caja Murcia Hipotecario II
Class A (ISIN ES0312272000): affirmed at 'AA-sf'; Outlook Stable
Class B (ISIN ES0312272018): affirmed at 'A+sf'; Outlook Stable
Class C (ISIN ES0312272026): affirmed at 'BB+sf'; Outlook Stable