Fitch Rates Hypenn RMBS V B.V.'s Notes 'AAAsf'; Outlook Stable
OREANDA-NEWS. Fitch Ratings has assigned Hypenn RMBS V B.V.'s notes ratings as follows:
EUR125m Class A1 floating-rate notes: 'AAAsf'; Outlook Stable
EUR375m Class A2 floating-rate notes: 'AAAsf'; Outlook Stable
EUR31m Class B notes: not rated
This transaction is a true sale securitisation of prime mortgage loans originated in the Netherlands by Nationale-Nederlanden Bank N.V. (NNB) and Nationale-Nederlanden Levensverzekering Maatschappij N.V. (NNL), which are wholly owned subsidiaries of NN Group N.V.
KEY RATING DRIVERS
The 52-month seasoned static portfolio consists of prime residential mortgage loans with a weighted average (WA) original loan-to-market value (OLTMV) of 97.1% and a debt-to-income ratio of 24.4%. The WA OLTMV is slightly above the level typically seen in Fitch-rated Dutch RMBS transactions.
Very Long Note Maturity
Of the loans, 13.9% are perpetual interest only and do not have a final maturity date. The final legal maturity of the notes is therefore extended and adds a degree of uncertainty to the transaction.
No NHG Loan Foreclosure Adjustment
All loans benefit from a Nationale Hypotheek Garantie (NHG). No reduction in foreclosure frequency for the NHG loans was applied, as historical data provided did not show a clear pattern of lower defaults for NHG loans from the originator. Fitch was also provided with data on historical claims, which enabled the agency to determine a compliance ratio assumption.
A cash advance facility of 1.5% of the class A notes (floored at 0.75% of class A at close) is available as liquidity support to meet senior costs and class A interest shortfalls. The non-amortising reserve fund will only build up after close through excess spread, to its target of 1% of the notes at close.
The issuer has entered into a fixed-floating interest rate swap agreement with Rabobank to hedge the mismatch between the fixed-rate loans and the floating-rate class A1 and A2 notes. Under the swap, the issuer will exchange scheduled interest on the mortgages, less senior fees and excess spread of 0.5%, in return for interest owed on the class A1 and A2 notes, less any recorded principal deficiency.
Material increases in the frequency of defaults and loss severity on defaulted receivables could produce losses larger than Fitch's base case expectations, which in turn may result in negative rating actions on the notes. Fitch's analysis revealed that a 30% increase in the WA foreclosure frequency, along with a 30% decrease in the WA recovery rate, would result in a model-implied-downgrade of the class A notes to 'A+sf'.
More detail on key rating drivers and rating sensitivities are further described in the accompanying new issue report, which is available at www.fitchratings.com.
DUE DILIGENCE USAGE
Fitch was provided with a third party asset portfolio assessment in relation to this rating action.
Fitch reviewed the results of the third party assessment conducted on the asset portfolio information, and performed adjustments to its credit analysis, as outlined in the accompanying new issue report.
Fitch also conducted a review of a small targeted sample of 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.
REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for that asset class is available by accessing the appendix that accompanies the new issue report (see "Hypenn RMBS V B.V. - Appendix", at www.fitchratings.com). In addition refer to the special report "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions" dated 2 March 2016 available on the Fitch website.
Sources of Information:
The information below was used in the analysis:
- Loan-by-loan data tape in Fitch's ResiEMEA template provided by NNB as at 29 February 2016
- Static cumulative and dynamic arrears data on NNB's mortgage loan book
- Investor reports for the existing Hypenn transactions
- A portfolio of 2,461 foreclosed properties (after correcting for missing data), representing all loans foreclosed since 2005 provided by NNB
- The House Price Index from the CBS (Statistics Netherlands)