Correct: Fitch Rates Orange Lion XIII, XIV and XV RMBS B. V. Final 'AAAsf'/Stable
Fitch Ratings has assigned Orange Lion XIII, XIV and XV RMBS B. V.'s mortgage-backed notes ratings as follows:
Orange Lion XIII RMBS B. V. (OLXIII)
EUR2,822,300,000 Class A floating-rate mortgage-backed notes: 'AAAsf'; Outlook Stable
EUR180,100,000 Class B mortgage-backed notes: not rated
EUR30,000,000 Class C notes for funding reserve: not rated
Orange Lion XIV RMBS B. V. (OLXIV)
EUR5,471,300,000 Class A floating-rate mortgage-backed notes: 'AAAsf'; Outlook Stable
EUR380,300,000 Class B mortgage-backed notes: not rated
EUR58,500,000 Class C notes for funding reserve: not rated
Orange Lion XV RMBS B. V. (OLXV)
EUR5,479,600,000 Class A floating-rate mortgage-backed notes: 'AAAsf'; Outlook Stable
EUR380,900,000 Class B mortgage-backed notes: not rated
EUR58,600,000 Class C notes for funding reserve: not rated
These transactions are true-sale securitisations of prime Dutch residential mortgage loans originated and serviced by ING Bank N. V. (ING) and are fully retained.
KEY RATING DRIVERS
Average Portfolio Risk
The average seasoning of the three portfolios is 74 months. The portfolios of OLXIII, OLXIV and OLXV have a weighted average (WA) original loan-to-market-value (OLTMV) of 87.5%, 86.6% and 86.5%, respectively. The WA debt-to-income ratio (DTI) is 27.7% for OLXIII, whereas OLXIV and OLXV have a WA DTI of 25.1% and 25.2%, respectively. These characteristics are typical of Fitch-rated Dutch RMBS transactions. The portfolios have between 5.5% and 5.6% seller employees. OLXIII has 12.3% self-employed borrowers in the portfolio. This is 14.8% for OLXIV and 15.1% for OLXV. OLXIII has 57.8% interest-only loans, whereas both OLXIV and OLXV have 46.7% interest-only loans.
Supporting Credit Enhancement
Credit enhancement (CE) for the class A of OLXIII is 7% at closing, and 7.5% for OLXIV and OLXV each, provided by subordination of the class B notes of 6% and 6.5% respectively. All three transactions contain a non-amortising cash reserve (1%), fully funded at closing through the issue of the class C notes.
NHG Loans Drive Higher Recoveries
Within the OLXIII portfolio, 39.6% of the loans benefit from a Nationale Hypotheek Garantie (NHG) guarantee, while this is 25.6% for OLXIV and 25.4% for OLXV. Fitch used historical claims data to determine a compliance ratio assumption. The agency observed a lower compliance ratio for loans originated since 2012, which affects over 60% of the NHG loans in each of the portfolios. Hence a lower compliance ratio than the market average was applied. Nonetheless, the proportion of NHG-backed loans results in increased recovery rates for each portfolio. Fitch also did not apply any reduction in foreclosure frequency for the NHG loans, as the provided historical data did not show a clear pattern of lower defaults for NHG loans.
Swap Providing Credit Support
An interest rate swap is in place, exchanging the lesser of scheduled and actual interest on the mortgages, including interest earned on the transaction account, less senior fees and excess spread of 0.5%, for interest on the class A notes. ING is both the servicer and swap provider and it is unlikely that a replacement can be found on the same terms should ING default. Hence, the agency stressed the senior fees covered by the swap in its analysis.
Concentrated Counterparty Exposure
This transaction relies heavily on the creditworthiness of ING, which fulfils a number of roles. Fitch gave full credit to structural features mitigating deposit set-off and commingling risk embedded in the transaction.
RATING SENSITIVITIES
Material increases in the frequency of defaults and loss severity on defaulted receivables could produce losses larger than Fitch's base case expectations, which in turn may result in negative rating actions on the notes. Fitch's analysis revealed that a 30% increase in the WA foreclosure frequency, along with a 30% decrease in the WA recovery rate, would result in a model-implied-downgrade of the class A notes to 'Asf' for all three transactions.
More detail on key rating drivers and rating sensitivities are further described in the upcoming new issue report which will be available at www. fitchratings. com.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
DATA ADEQUACY
For its ratings analysis, Fitch received a data template with all fields fully completed.
Fitch reviewed the results of a third party assessment conducted on the asset portfolio information. There were several findings in relation to a borrower's income, valuation date and a property's foreclosure value. Fitch has adjusted its asset analysis to account for these.
Overall and together with the assumptions referred to above, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
Sources of Information:
The information below was used in the analysis:
- Loan-by-loan data tape in Fitch's ResiEMEA template provided by ING as at 31 March 2016
- Transaction documentation provided by ING as of May 2016
- Static and dynamic performance data on ING's mortgage loan book
- Investor reports for the existing Orange Lion transactions
- A portfolio of 10,107 foreclosed properties, representing all loans foreclosed since 2004 provided by ING
- The House Price Index from the CBS (Statistics Netherlands)
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