OREANDA-NEWS. Fitch Ratings has affirmed Courtine RMBS 2013-1 B.V, a securitisation of Dutch residential mortgages originated by F. Van Lanschot Bankiers N.V. (Van Lanschot; BBB+/Stable/F2).

A full list of rating actions follows at the end of this rating action commentary.

KEY RATING DRIVERS
Strong Credit Enhancement
Credit enhancement (CE) for the class A and B notes of 37.2% and 27.7% respectively are significantly higher than in most Fitch-rated Dutch residential mortgage securitisations. The high CE level is resilient to a number of stresses associated with a revolving portfolio (until August 2018) in which the average loan per borrower is large and in excess of EUR500,000.

Slightly Better-than-Average Asset Performance
Three-months plus arrears stood at 0.9% of the outstanding collateral balance, which is slightly above the average Fitch-rated Dutch prime three-months plus arrears of 0.6%. In Fitch's view, the arrears in these transactions may be overstated by the more conservative reporting style of Van Lanschot compared with those seen in other Fitch-rated Dutch RMBS. In particular, the arrears reported by Van Lanschot include delinquencies on all borrower claims as opposed to balances relating to mortgages in arrears.

There have only been two foreclosures reported since closing in August 2013. Loans in arrears by more than three months are moved to a recovery division for special attention and a tailor-made repayment plan is set up for each of its high net worth borrowers. The servicer has therefore been able to achieve a higher-than-average cure rate for arrears by liquidating other assets owned by its clients.

Revolving Portfolio
The portfolio will remain in its revolving period until August 2018. To account for potential deterioration in asset characteristics, the agency stressed the portfolio composition regarding three-month plus arrears, as well as interest-only and life insurance loans to the maximum allowed under the replenishment criteria outlined in the transaction documentation.

Geographical data was unavailable for 7.5% of the portfolio. The province for this portion of the pool was set to 'unspecified' which carries the highest market value decline (MVD) in the Dutch market of 33%.

Inconsistent Property Valuations
Certain inconsistencies exist between year-on-year property valuations in the data provided. However, the net effect of the discrepancy in valuations is an increase in original loan-to-value (OLTV), which results in a higher base foreclosure frequency being applied to the transaction. The transaction's CE was sufficient to withstand the additional stress from the higher foreclosure frequency.

Underwriting Risks
A lender adjustment of 1.1x was applied in line with the approach taken at transaction close. It reflects risks to both the underwriting as well as the servicing processes. Additionally, an agreed-upon-procedures review was undertaken at transaction close, which was found to be less than satisfactory. The lender adjustment does not have a material effect on the rating outcome.

Unhedged Transaction
The transaction relies on the natural hedge provided by the proportion of fixed- to floating-rate loans against its fixed- and floating-rate liabilities (current proportion across both is roughly 80%/20%). In the absence of a swap the agency has stressed the transaction's excess spread accordingly, which did not have a material effect on the rating outcome.

Commingling Risk
The collection account bank for the transaction is Van Lanschot, whose ratings are below the minimum ratings specified by Fitch criteria to support 'AAAsf'-rated notes. One month's commingling loss exposure has been factored into the asset analysis to account for this risk.

Insurance Set-off Risk
Within the portfolio 11% are loans with life insurance payment vehicles attached. Upon insolvency of the insurance provider there is a risk that the borrowers may try to set-off their insurance claim against the lender. Fitch accounts for this risk by assuming a capital build-up over 30 years and then analysing the effect of a combined default of the insurance providers, factoring in the affiliation of the insurance provider to the original lender. This was found to have a minimal effect on the rating outcome.

Van Lanschot is a deposit-taking institution. Under the terms of the transaction, if the amount of deposits in the portfolio subject to set-off (i.e. net of the European deposit guarantee scheme) exceeds 6%, the seller will fund the financial collateral account (a dynamic reserve fund). In line with the approach employed at transaction close, the agency has assumed 5% of the portfolio is subject to deposit set-off risk.

RATING SENSITIVITIES
Adverse macroeconomic conditions leading to higher arrears and defaults in excess of Fitch's 'AAAsf' stresses may erode the credit enhancement and lead to negative rating actions.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
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 errors or missing data related to the valuation information. These findings were considered in this analysis and factored into the lender adjustment applied.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of Van Lanschot's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

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 30 November 2015
-Transaction reporting provided by Intertrust Administrative Services B.V. as at 30 January 2016
-Discussions / updates from Van Lanschot dated 16 March 2016

MODELS
The models below were used in the analysis. Click on the link for a description of the model.