TEXT-S&P corrects by raising rtgs in RMBS Santander Hipotecario 3

Fri Nov 23, 2012 5:20am EST

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OVERVIEW

-- Banco Santander had acted as the GIC and swap provider for Santander Hipotecario 3 prior to our downgrade of Banco Santander on April 30, 2012.

-- After our April 30, 2012 downgrade of Banco Santander, the issuer took remedy actions and replaced the GIC provider with an eligible counterparty (Santander UK ; A/Watch Neg/A-1).

-- However, on Nov. 2, 2012, we incorrectly lowered our ratings on Santander Hipotecario 3's class A1, A2, and A3 notes, following our Oct. 15, 2012 downgrade of Banco Santander, by not taking into account the remedy actions, which had already taken place.

-- We have today corrected this error by raising our ratings on Santander Hipotecario 3's class A1, A2, and A3 notes.

-- Santander Hipotecario 3 is a Spanish RMBS transaction that closed in 2007.

Standard & Poor's Ratings Services today corrected by raising to 'BBB+ (sf)' from 'BBB (sf)' its credit ratings on Fondo de Titulizacion de Activos Santander Hipotecario 3's class A1, A2, and A3 notes.

On April 30, 2012, we lowered our ratings on Banco Santander S.A. to 'A-/A-2' from 'A+/A-1' (see "Negative Rating Actions On 16 Spanish Banks Following Sovereign Downgrade"). At this time, Banco Santander acted as the guaranteed investment contract (GIC) provider and swap counterparty for Santander Hipotecario 3.

On Oct. 15, 2012, we lowered to 'BBB' from 'A-' our long-term issuer credit rating (ICR) on Banco Santander (BBB/Negative/A-2), following the lowering of our long-term sovereign rating on the Kingdom of Spain (see "Various Rating Actions On Spanish Financial Institutions Following Sovereign Downgrade").

Under our 2012 counterparty criteria, if the issuer does not take remedy actions after the downgrade of the counterparty, the ratings on the notes will be linked to the ICR on the counterparty (see "Counterparty Risk Framework Methodology And Assumptions," published on May 31, 2012).

Due to an error, on Nov. 2, 2012, we incorrectly lowered to 'BBB (sf)' from 'BBB+ (sf)' our ratings on Santander Hipotecario 3's class A1, A2, and A3 notes as we did not take into account the remedy actions, which had already taken place after our April 30, 2012 downgrade of Banco Santander (see "Ratings Lowered On 11 Classes Of Notes In Five Spanish SME Securitizations For Counterparty Reasons"). The issuer had already taken remedy actions after our April 30, 2012 downgrade, by replacing Banco Santander as GIC provider with Santander UK PLC (A/Watch Neg/A-1), and Banco Santander as swap counterparty, had deposited collateral.

Today, we have corrected this error by raising to 'BBB+ (sf)' from 'BBB (sf)' our ratings on Santander Hipotecario 3's class A1, A2, and A3 notes to reflect the eligibility of the counterparty.

Santander Hipotecario 3 is a Spanish residential mortgage-backed securities (RMBS) transaction that closed in April 2007. Banco Santander is the originator of the transaction and the portfolio comprises residential mortgage-backed loans granted to individuals to purchase properties.

RELATED CRITERIA AND RESEARCH

-- Ratings Lowered On 11 Classes Of Notes In Five Spanish SME Securitizations For Counterparty Reasons, Nov. 2, 2012

-- Various Rating Actions On Spanish Financial Institutions Following Sovereign Downgrade, Oct. 15, 2012

-- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012

-- Negative Rating Actions On 16 Spanish Banks Following Sovereign

Downgrade, April 30, 2012

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