(The following statement was released by the rating agency)
Jan 16 - Fitch Ratings has assigned Storm 2013-1 B.V.’s RMBS notes expected ratings, as follows:
EUR150,000,000 Class A1: assigned ‘AAAsf(EXP)', Outlook Stable
EUR550,000,000 Class A2: assigned ‘AAAsf(EXP)', Outlook Stable
EUR17,100,000 Class B: assigned ‘AA-sf(EXP)', Outlook Stable
EUR13,100,000 Class C: assigned ‘BBB+sf(EXP)', Outlook Stable
EUR14,500,000 Class D: assigned ‘BBsf(EXP)', Outlook Stable
EUR7,500,000 Class E: assigned ‘BBsf(EXP)', Outlook Stable
The expected ratings are based on Fitch’s assessment of the underlying collateral, available credit enhancement, the origination and underwriting procedures used by the seller and the servicer and the transaction’s sound legal structure. Final ratings are subject to receipt of final documents conforming to information already received.
This transaction is a true sale securitisation of Dutch residential mortgage loans, originated and sold by Obvion N.V. (not rated). Since 10th May 2012, Obvion is 100% owned by Rabobank Group (‘AA’/Stable/‘F1+') and has an established track record as a mortgage lender and issuer of securitisations in the Netherlands. This is the 23rd transaction issued under the STORM series since 2003.
Credit enhancement for the class A notes is 7.0%, which is provided by subordination and a non-amortising reserve fund equal to 1.0% at closing. The transaction benefits from an amortising liquidity facility of 2.0% at closing, a build-up of the reserve fund to 1.3% and an interest rate swap providing an excess margin of 50 basis points.
The transaction is backed by a four year seasoned non-revolving portfolio consisting of prime residential mortgage loans with a weighted-average (WA) original loan-to-market-value (OLTMV) of 85.8% and a WA debt-to-income ratio (DTI) of 30.8%, both of which are typical for Fitch-rated Dutch RMBS transactions. The pool composition is similar to the previous STORM transactions. The purchase of further advances into the pool is allowed after closing subject to stringent conditions.
Both the STORM series as well as Obvion’s loan book have shown stable performance in terms of arrears and losses. The 90+ days arrears of the previous Fitch-rated transactions have been mostly lower than the Dutch Index throughout the life of the deals.
Rabobank fulfils a number of roles, including collection account provider, issuer account provider, cash advance facility provider and commingling guarantor and therefore this transaction relies strongly on the creditworthiness of Rabobank. In addition Rabobank acts as back-up swap counterparty through its London branch. Fitch considers that the swap provides a certain degree of liquidity and credit support in this transaction and the replacement of the swap would likely be at a high cost, due to the nature of the swap structure, which in turn may affect the interest waterfall.
Although the notification trigger is set below the ‘A’ level, the agency did not consider the risk of a loss of funds due to commingling or disruption of payments in the cash flow analysis, as Fitch considers that this risk is mitigated by means of a commingling guarantee provided by Rabobank. In addition the transaction is not exposed to the risk of deposit set-off or other claims.
Fitch judges further set-off risks in this transaction to be minimal due to the structural mitigants in place in relation to construction deposit, savings and investment set-off as well as the limited proportion of insurance loans included in the portfolio. For the 5.6% insurance loans included in the pool Fitch did incorporate in its analysis the risk that borrowers might exercise set-off following the failure of insurance providers.
Obvion provided Fitch with loan-by-loan information on the portfolio as of 1 January 2013. All of the data fields included in the pool cut were of solid quality and Obvion provided additional information for mortgage loans based on the income of two borrowers.
Fitch reviewed an Agreed Upon Procedures (AUP) report regarding the data provided by the arranger. The agency believes the sample size, the relevance of the tested fields, and the limited number of material error findings suggests the originator provided an acceptable quality of data. In addition, Fitch relied on its own file review undertaken for a prior transaction (STORM 2012-IV) on 25 July 2012, which consisted of 15 loans selected from the portfolio. This was considered a very good proxy for STORM 2013-I, given the similar asset characteristics and recent timing. The agency discovered no errors or unexpected results. Based on the received repossession data, analysis showed that the performance was in line with Fitch’s standard Dutch RMBS assumptions; therefore, Fitch did not adjust its quick sale, market value decline or foreclosure timing assumptions.
To analyse the CE levels, Fitch evaluated the collateral using its default model, details of which can be found in the reports entitled “EMEA Residential Mortgage Loss Criteria”, dated 7 June 2012, “EMEA RMBS Criteria Addendum - Netherlands”, dated 14 June 2012, available at www.fitchratings.com. The agency assessed the transaction cash flows using default and loss severity assumptions under various structural stresses including prepayment speeds and interest rate scenarios. The cash flow tests showed that each class of notes could withstand loan losses at a level corresponding to the related stress scenario without incurring any principal loss or interest shortfall and can retire principal by the legal final maturity.
Fitch’s stress and rating sensitivity analysis is detailed in the presale report which will shortly be available at www.fitchratings.com.
Link to Fitch Ratings’ Report: Storm 2013-I B.V.