(Repeat for additional subscribers)
May 22 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Lowland Mortgage Backed Securities 1 B.V. (Lowland 1), Lowland
Mortgage Backed Securities 2 B.V. (Lowland 2) and Lowland Mortgage Backed Securities 3 B.V.
(Lowland 3), a series of Dutch RMBS transactions partially backed by the Nationale Hypotheek
The mortgages in the transactions were originated and serviced by SNS Bank N.V.
(SNS, BBB+/Negative/F2) and its subsidiaries. NHG loans comprise 36% of the
current outstanding pool in Lowland 1 and around 1% in Lowland 2 and 3.
A full list of rating actions is at the end of this commentary.
KEY RATING DRIVERS
The affirmations reflect the performance of the underlying assets. As of the
April 2014 payment date, three-months plus arrears ranged from 0.91% (Lowland 1)
to 0.19% (Lowland 3) compared with Fitch's Dutch prime three-month plus arrears
figure of 0.83%. The outstanding balance of loans with properties sold at a loss
ranged between 0.25% (Lowland 1) to 0% (Lowland 2 and 3).
The higher arrears in Lowland 1 are driven by the non-NHG portion of the pool.
Based on the loan-by-loan data received from SNS, the non-NHG portion of arrears
accounted for 81% of total arrears compared with their 64% share of the total
pool. To account for the better performance of NHG-loans, in its analysis Fitch
reduced the default probabilities of this portion of the portfolio.
There is no swap in place to hedge the interest rate differential between the
notes and the mortgage loans in any of the transactions. Instead, the
proportions of fixed- and floating-rate notes issued are similar to the
proportions of fixed- and floating-rate loans in the pool, thereby providing
natural hedging for the interest rate risk, as fixed rate loan proceeds are used
to pay down the fixed rate notes and floating rate proceeds are used to pay down
the floating rate notes.
Despite minimum weighted average margin and interest rate guarantees designed to
protect against a decline in portfolio yield provided by SNS and its
subsidiaries, Fitch has not given credit to this commitment. In its analysis,
the agency made conservative assumptions on the cash flow proceeds from the
portfolio. The analysis showed that the current credit enhancement is sufficient
to withstand the respective rating stresses.
Note amortisation in all the deals is sequential. As a the portfolios continue
to deleverage, Fitch expects the credit enhancement available to the notes to
increase further from levels seen in the latest investor reports.
Deterioration in asset performance may result from economic factors, in
particular the increasing effect of unemployment. A corresponding increase in
new foreclosures and the associated pressure on excess spread, reserve fund and
liquidity facility beyond Fitch's assumptions could result in negative rating
action, particularly for junior tranches.
The rating actions are as follows:
Lowland Mortgage Backed Securities 1 B.V.
Class A1 (XS0729888924) affirmed at 'AAAsf'; Outlook Stable
Class A2 (XS0729892108) affirmed at 'AAAsf'; Outlook Stable
Class B (XS0729892959) affirmed at 'AAsf'; Outlook Stable
Class C (XS0729893411) affirmed at 'BBB+sf'; Outlook Stable
Class D (XS0729893767) affirmed at 'BBsf'; Outlook Stable
Lowland Mortgage Backed Securities 2 B.V.
Class A1 (XS0887366135) affirmed at 'AAAsf'; Outlook Stable
Class A2 (XS0887366481) affirmed at 'AAAsf'; Outlook Stable
Class B (XS0887378064) affirmed at 'AAsf'; Outlook Stable
Class C (XS0887378577) affirmed at 'Asf'; Outlook Stable
Class D (XS0887378908) affirmed at 'BBsf'; Outlook Stable
Lowland Mortgage Backed Securities 3 B.V.
Class A1 (XS0988484878) affirmed at 'AAAsf'; Outlook Stable
Class A2 (XS0988486493) affirmed at 'AAAsf'; Outlook Stable
Class B (XS0988487202) affirmed at 'Asf'; Outlook Stable
Class C (XS0988487970) affirmed at 'BBB+sf'; Outlook Stable
Class D (XS0988488606) affirmed at 'BBB-sf'; Outlook Stable