(The following statement was released by the rating agency)
Feb 11 - Fitch Ratings says Outlook revisions to Negative for the Dutch sovereign and the state-supported mortgage insurance entity Stichting Waarborgfonds Eigen Woningen (WEW) will not impact the ratings of Dutch RMBS.
The Outlooks on the Netherlands’ ( ‘AAA’/‘F1+') ratings were revised to Negative from Stable on 5 February 2013. The Outlook on WEW ( ‘AAA’/‘F1+'), a fully state-supported entity provides mortgage insurance through the National Mortgage Guarantee (NHG) scheme to a large number of loans in several RMBS pools, was revised to Negative from Stable on 8 February 2013 since WEW’s ratings mirrors that of the sovereign.
Fitch currently gives full credit in its ratings analysis for NHG backed mortgages to the pay-out from NHG’s guarantee, given WEW’s high rating and state support. Adjustments are however made to reflect the risk of claim rejections due to operational issues (e.g. defective documentation) and a discrepancy between the guarantee cover amount and the mortgage loan amount.
The agency believes that the credit to the NHG guarantee in a ‘AAAsf’ rating scenario remains appropriate after the Outlook revision to WEW’s ratings, given the strategic nature of the NHG guarantee in fulfilling the Dutch government’s objective of promoting access to home ownership for lower and middle income households.
The possibility of the state reducing or reneging on its commitment to support the WEW or NHG scheme currently remains extremely remote in Fitch’s view. As a result, the agency believes in the case of a downgrade of the Dutch sovereign below ‘AA’/‘F1+’ such willingness and ability to support the NHG scheme could gradually diminish as the government will be faced with increasingly difficult policy choices on the use of state funds. The agency believes, given the important status of the NHG guarantee in the market, such changes are more likely to come incrementally through increasing the premium for an NHG guarantee and closer scrutiny of claims which might lead to an increase in rejection rates.
Fitch will publish a more detailed commentary shortly about the sensitivity of Dutch RMBS ratings to a downgrade of the Dutch sovereign below ‘AA’/‘F1+', focussing its analysis on transactions with a large portion of NHG guaranteed mortgage loans.
ING Bank NV (‘A+/‘F1+'), ABN AMRO Bank NV (‘A+/‘F1+') and Bank Nederlandse Gemeenten’s (‘AAA’/‘F1+') Outlooks were also revised to Negative on 6 February 2013, as these ratings are all based on the expected state support. These banks act as important counterparties in many Dutch RMBS transactions, often as issuer account providers and/or swap providers. After this change in Outlook, the ratings of these banks remain in line with Fitch’s counterparty criteria to support note ratings up to ‘AAAsf’, therefore the change in these banks’ Outlooks has no impact on RMBS ratings.