(The following statement was released by the rating agency)
Feb 08 - Fitch Ratings has revised Stichting Waarborgfonds Eigen Woningen's (WEW)'s Outlook
to Negative from Stable. At the same time the agency has affirmed the Long-term foreign and
local currency ratings at 'AAA' and a Short-term Local currency rating at 'F1+'.
The Outlook revision reflects the revision of Netherlands'
('AAA'/Negative/'F1+') Outlook. The revision also reflects the application of
the "Rating of Public Sector Entities - Outside the United States" methodology
according to which dependent entities cannot be rated above the owner (sponsor)
and non-dependent entities cannot be rated above the sponsor unless their
stand-alone rating is stronger than the sponsor.
WEW's ratings are credit linked to its sponsor, the sovereign, as WEW receives
support in the way of a back stop liquidity agreement by the state. WEW is a
foundation and receives oversight by the state. WEW's board of supervisors is
formed of five members. Of these, three are appointed by members of the
government; two by the Ministry of Internal Affairs and Kingdom Relations and
one by the Ministry of Finance. The availability of housing is one of the Dutch
government's strategic policies and as such it has supported WEW through
approving policies to alleviate the effects of the economic crisis. This has
mainly been through promoting access to homeownership for lower and middle
income households. Approximately 30% of total mortgages in the Dutch market
carry a WEW guarantee.
One of the reasons the sovereign's Outlook was revised to Negative is due to
real estate prices declining at a more rapid pace than forecast and the housing
correction being sharper than initially expected. Fitch expects the current
trend of 5%-7% annual correction to continue until 2014.
A downgrade could result from a downgrade of the Netherlands' sovereign rating.
A downgrade could also result from an adverse change in WEW's legal status and
support from the state.
Additionally, an acceleration of the pace of the housing market decline may have
a negative impact on the overall Dutch economic activity, and on the
Netherlands's public finances. This may finally hamper the sponsor's ability to
support its dependant entities and could lead to a review of the notching
difference between the sovereign and WEW.
Fitch assumes that capital funds will be sufficient to cover rescission payments
and the liquidity facility would cover this in case of a shortfall.
Fitch also expects there will no change to the financial support offered by the
government consisting of a contractual support system through a backstop
agreement, where the state is responsible for providing interest free loans in
case of need.