OREANDA-NEWS. June 16, 2015. Fitch Ratings has affirmed six tranches of Eurohome Mortgages, a pan-European RMBS transaction comprising assets originated by Deutsche Bank (DB, A-/Negative/F1) through its Italian platform, DB Mutui S.p.A. (67.3% of the current pool) and German platform (32.7%). The rating actions are as follows:

Class A (ISIN XS0309227279): affirmed at 'CCCsf'; Recovery Estimate revised to 90% from 95%
Class B (ISIN XS0309230497): affirmed at 'CCsf'; Recovery Estimate 0%
Class C (ISIN XS0309232196): affirmed at 'Csf'; Recovery Estimate 0%
Class D (ISIN XS0309232600): affirmed at 'Csf'; Recovery Estimate 0%
Class E (ISIN XS0309233244): affirmed at 'Csf'; Recovery Estimate 0%
Class X (ISIN XS0309234309): affirmed at 'Csf'; Recovery Estimate 0%

KEY RATING DRIVERS

Weak Asset Performance
Performance of the underlying assets in the two portfolios remains weak. Loans in arrears by more than three months in the Italian portion of the portfolio reached 38.3% (of the Italian collateral) in May 2015, while the portion of borrowers with three or more missed instalments in the German pool have been broadly stable at 20.4%, since the beginning of 2011. This compares with the more than 90 day delinquency index of Fitch-rated RMBS transactions of 1.5% for Italy and 0.5% for Germany. The cumulative gross default rate for the total portfolio equals approximately 16%, up from 14.8% a year ago.

Limited Recoveries
Fitch reiterates that the recoveries collected by servicers to date are fairly low compared with the amount of defaulted loans. The timing and amount of future recoveries remain uncertain, especially for the Italian portion of the portfolio as the recovery process in Italy is lengthy and cumbersome.

Increasing Principal Deficiency Ledger (PDL)
The poor performance of the underlying assets - and the lack of excess spread - has meant that the reserve fund, which was fully utilised in February 2009, remains depleted. The PDL has reached as far as 72% of the class B notes balance. Given the current pace of defaults and loss recognition in the two portfolios, Fitch expects the class A PDL to be reached in approximately 18 months, at which point the class B note interest will no longer be paid, as is already the case for the class C to X notes.

RATING SENSITIVITIES

Given the low rating levels of the notes, further negative rating actions may be triggered by an actual default on the notes, starting with the most junior notes.

Recoveries on defaulted assets beyond Fitch's assumptions that result in the reversal of the PDL and replenishment of the reserve fund may lead to positive rating actions on the notes, starting with the most senior classes.

DUE DILIGENCE USAGE

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 pools and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolios 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 pools 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 pools 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 DB Mutui SpA and DB AG as at 31 March 2015
-Transaction reporting provided by DB Mutui SpA and DB AG as at 31 March 2015