Fitch Affirms Belgian Lion Class A Notes at 'AAAsf'; Outlook Stable
The transaction is a securitisation of prime residential mortgage loans secured by residential properties located in Belgium.
KEY RATING DRIVERS
Cumulative gross defaults stood at 3.9% of the initial outstanding notional balance of the loans as of end-July 2016, which, while higher than the levels observed for other Belgian prime RMBS transaction, reflects the conservative default definition for the transaction (ie loans in arrears by more than three months). As of end-July 2016, the transaction cure rate following default was approximately 39%, with a resulting post-cure gross cumulative default rate of 2.4%.
Cumulative realised losses continued to mount over the 12 months to end-July 2016, rising to EUR9.3m from EUR5.7m over the period, although the cumulative realised loss ratio remain low, at of 0.2% of the initial loan balance. The total number of properties liquidated with a loss remains low, at 202 properties from the 34,428 loans in the pool as of end-July 2016. Fitch expects realised losses to continue to worsen, with approximately 35% of the loans under workout as of end-July 2016 (EUR34.4m of the overall defaulted balance of the loans) being in liquidation proceedings.
A reserve account is available to cover any interest shortfalls and principal deficiency ledger (PDL) amounts for the class A notes and is fully funded to date, providing credit enhancement to the senior notes. Protection to the class A notes also reflects the continued deleveraging of the transaction, with the class A notes credit enhancement standing at 21.3% as of end-July 2016.
Further liquidity protection is also available to the class A notes via a fully funded liquidity account, equal to 5% of the aggregate initial balance of the notes at closing or 9% of the outstanding notes amount as of end-July 2016 and available to cover any interest shortfalls on the senior notes.
Under the transaction, the issuer provisions for any realised losses, which continue to be recorded onto the unrated class B notes PDL, equal to EUR9.3m as of end-July 2016 (or 1.8% of the class B notes).
RATING SENSITIVITIES
ING Belgium (A+/Stable/F1) performs all the key counterparty roles under the transaction, including those of account bank, GIC provider, interest-rate swap provider, liquidity facility provider and servicer. As such, any deterioration in ING Belgium's credit profile could affect the operational performance of the deal.
Deterioration in asset performance may result from economic factors, in particular the increasing effect of unemployment. A corresponding increase in new defaults could result in liquidity pressures and negative rating action.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10
No third party due diligence was provided or reviewed in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
Overall, Fitch's assessment of the 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 provided by ING Belgium as at 31 July 2016
-Transaction reporting provided by ING Belgium as at 25 August 2016
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