Fitch Affirms La Hipotecaria's Panamanian Cross-Border Transactions
KEY RATING DRIVERS
-- Low Level of Delinquencies
Delinquency levels have been in line with Fitch's expectations; excellent performance of the underlying portfolios is partly attributed to the direct deduction payment mechanism benefitting the majority of the securitized loans. La Hipotecaria Eighth Mortgage-Backed Notes' cumulative +180 day delinquencies equalled 1.57% of the original pool balance as of April 2015 (May 2014: 1.46%). La Hipotecaria Tenth Mortgage-Backed Notes' cumulative +180 day delinquencies totalled 0.52% as of April 2015 of the original pool balance (May 2014: 0.34%). La Hipotecaria Twelfth Mortgage-Backed Notes' cumulative +180 day delinquencies totalled 0.03% as of April 2015 of the original pool balance.
-- Increasing Credit Enhancement (CE)
La Hipotecaria's Panamanian cross-border transactions continue to benefit from increasing CE. Current CE equals 28.77% (May 2014: 26.55%) for Eighth Mortgage-Backed Notes; 18.07% (May 2014: 16.23%) for the Tenth Mortgage-Backed Notes and 9.10% for Twelfth Mortgage-Backed Notes (9.00% at closing).
-- Affirmation of Panama's Sovereign Ratings
On Feb. 19, 2015, Fitch affirmed Panama's foreign currency (FC) and local currency (LC) Issuer Default Ratings (IDRs) at 'BBB'; Outlook Stable. In the agency's view, Panama's stable macroeconomic performance has a positive impact on the transactions.
-- Credit Quality of Guaranty Provider
La Hipotecaria Panamanian Mortgage Trust 2010-1 and 2014-1 certificates benefit from a payment guarantee by Overseas Private Investment Corporation (OPIC) in the event funds are insufficient to cover the monthly interest and final principal payment of the notes. OPIC is backed by the full faith and credit of the United States of America (U.S.; rated 'AAA'; Outlook Stable by Fitch).
RATING SENSITIVITIES
In Fitch's view, further stable improvement of CE, prepayment rates, recoveries and excess spread, could lead to an upgrade of the rating of La Hipotecaria's Tenth and Twelfth Mortgage-Backed Notes. Improvement of CE of La Hipotecaria's Tenth Mortgage-Backed Notes would also lead to an upgrade of the unenhanced long-term rating assigned to La Hipotecaria Panamanian Mortgage Trust 2010-1 certificates.
Severe increases in delinquencies and prepayments, as well as reductions in recovery rates, could lead to a downgrade of the series A notes of La Hipotecaria's Eighth, Tenth and Twelfth Mortgage-Backed Notes. In addition, the notes are sensitive to changes in the credit quality of Panama.
The ratings of the series 2010-1 and 2014-1 certificates are sensitive to changes in the credit quality of the U.S. sovereign as OPIC is an agency of the U.S.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action
TRANSACTION SUMMARY
La Hipotecaria's Eighth, Tenth and Twelfth Mortgage Trusts are backed by portfolios of residential mortgages originated by Banco La Hipotecaria S.A. (formerly La Hipotecaria S.A.) to low- to middle-income individuals in the Republic of Panama. A high percentage of the portfolios benefits from the direct deduction of mortgage installments from the borrower's wages, significantly mitigating exposure to willingness-to-pay and contributing to lower default levels. The 2007-1, 2010-1 and 2014-1 certificates are backed by a portion of the series A notes issued by each trust, respectively.
The series 2010-1 and 2014-1 trust certificates benefit from an irrevocable and unconditional guaranty of monthly interest and the final principal, granted by OPIC, an agency of the U.S.
Fitch has affirmed the following ratings:
La Hipotecaria Panamanian Mortgage Trust 2007-1
--2007-1 certificates at 'BBB+sf'; Outlook Stable;
--Unenhanced long-term rating at 'BBB+sf'; Outlook Stable.
La Hipotecaria Eighth Mortgage-Backed Notes Trust
--Series A notes at 'BBB+sf'; Outlook Stable.
La Hipotecaria Panamanian Mortgage Trust 2010-1
--2010-1 certificates at 'AAAsf'; Outlook Stable;
--Unenhanced long-term rating at 'BBBsf'; Outlook Positive
La Hipotecaria Tenth Mortgage-Backed Notes Trust
--Series A notes at 'BBBsf'; Outlook Positive;
--Interest only notes at 'BBBsf'; Outlook Positive.
La Hipotecaria Panamanian Mortgage Trust 2014-1
--Class A-1 certificates at 'AAAsf', Outlook Stable.
La Hipotecaria Panamanian Mortgage Trust 2014-1
--Class A-2 certificates at 'BBBsf', Outlook Stable.
La Hipotecaria Twelfth Mortgage-Backed Notes Trust
--\\$68.25 million series A notes at 'BBBsf', Outlook Stable.
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