OREANDA-NEWS. April 13, 2015. Fitch Ratings has assigned Hypenn RMBS III B.V.'s mortgage-backed notes final ratings, as follows:

EUR160,800,000 Class A1 floating-rate notes: 'AAAsf'; Outlook Stable
EUR489,200,000 Class A2 floating-rate notes: 'AAAsf'; Outlook Stable
EUR48,900,000 Class B fixed-rate notes: not rated

The EUR698.9m transaction is a true sale securitisation of mortgage loans originated in the Netherlands by Nationale-Nederlanden Bank N.V. (NNB) and Nationale-Nederlanden Levensverzekeringsmaatschappij N.V. (NNL) which were subsequently sold to NNB.

Credit enhancement (CE) for the class A notes is 7% at closing, provided by the subordination of the class B notes.

KEY RATING DRIVERS

Portfolio Composition
The 52-month seasoned static portfolio consists of prime fixed rate residential mortgage loans with a weighted-average (WA) original loan-to-market-value (OLTMV) of 94.7% and a debt-to-income ratio (DTI) of 27.7%. The WA OLTMV is around 6% above the level typically seen in Fitch-rated Dutch RMBS transactions.

NHG Loans
The portfolio comprises 24.8% of loans that benefit from the national mortgage guarantee scheme (Nationale Hypotheek Garantie or NHG). No reduction in foreclosure frequency for the NHG loans was applied, since historical data provided did not show a clear pattern of lower defaults for NHG loans of the originator. Fitch was also provided with data on historical claims, which enabled the agency to determine a compliance ratio assumption.

Servicing Improvements Implemented
At the time of the previous Hypenn II transaction, Fitch highlighted weaknesses in the IT functionality within arrears management. NNB has since implemented a new IT system, bringing its IT functionality in line with peers.

Hedged Transaction
The issuer is to enter into a swap agreement with ING Bank N.V. to hedge the mismatch between fixed-rate mortgages and the floating-rate class A1 and A2 notes. Under the swap the issuer is to pay the interest scheduled on the mortgages, less senior fees and less excess spread of 50 bp per annum of the outstanding notes' balance, multiply by the sum of the class A1 and A2 notes and divided by the total notes' balance. The swap counterparty is to pay the interest due on the class A1 and A2 notes, less any recorded principal deficiency.

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 'A+sf'.

More detail on key rating drivers and rating sensitivities are further described in the accompanying new issue report which is available at www.fitchratings.com.

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, which indicated errors or missing data related to the properties' market value information and borrower income information. These findings were taken into consideration in this analysis by applying conservative adjustments to the market value and the borrower income, as set out more fully in the new issue report.

Fitch conducted a review of a small targeted sample of NNB's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Models
The models below were used in the analysis. Click on the link for a description of the model.

-ResiEMEA ResiEMEA
-EMEA Cash Flow Model EMEA Cash Flow Model

To analyse the credit enhancement levels, Fitch evaluated the collateral using its default model ResiEMEA. 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 ran retire by the legal final maturity.

A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for that asset class is available by accessing the appendix that accompanies the new issue report (see "Hypenn RMBS III B.V. - Appendix", at www.fitchratings.com).