OREANDA-NEWS. July 07, 2015. This commentary replaces the version published on 22 May 2015 and corrects the asset level data verification information included in the Data Adequacy section. The correct version is as follows:

Fitch Ratings has affirmed four tranches of Citadel 2010-I and 2010-II, a series of Dutch RMBS transactions. The securitised mortgages have been originated and continue to be serviced by F. Van Lanschot Bankiers N.V. (Van Lanschot, A-/Negative/F2).

A full list of rating actions is at the end of this commentary.

KEY RATING DRIVERS

Solid Performance
The affirmations reflect the stable performance of the underlying assets over the last 12 months. As of the most recent payment date, three-month plus arrears stood at 1.3% of the outstanding collateral balance in Citadel 2010-I and 1.5% in Citadel 2010-II. Both ratios are above Fitch's three-month plus arrears index for prime Dutch RMBS, which is at 0.83%.

However, Fitch believes the arrears levels in these transactions are likely to be overstated, given the more conservative reporting style of Van Lanschot, compared with the rest of the Dutch market. Van Lanschot's reported arrears are based on borrowers' payment status on all their existing claims with the bank, as opposed to the current status on their mortgage payments.

Given the high seasoning of the pools, the number of foreclosures remains limited to date with cumulative defaults as a percentage of the initial balance ranging from 0.03% (Citadel 2010-II) to 0.14% (Citadel 2010-I). Loans in arrears by more than three months are transferred to the recovery division for special attention and a tailor-made repayment plan is set up for each of its borrowers. The servicer has therefore been able to achieve a higher-than-market average cure rate for arrears by liquidating other assets owned by the clients.

Fitch expects the reasonable performance to continue due to the low risk profile of securitised loans and a gradual recovery of the Dutch housing market.

Reserve Fund
The reserve funds remain fully funded at 1.5% of the outstanding mortgage balance in both transactions. Fitch expects the transaction to generate sufficient annualised gross excess spread to cover any realised loss due in the upcoming payment dates. Given the low pipeline of potential defaults, no reserve fund draws are likely to occur in the near term.

Notes Amortisation
Note amortisation in these deals is fully sequential. As a result, Fitch expects a further build-up in credit enhancement available to the notes, as the pools continue to deleverage.

RATING SENSITIVITIES

Deterioration in asset performance may result from economic factors, in particular the increasing effect of unemployment. A corresponding increase in foreclosures, particularly given the higher-than-average loan size and property values in the underlying pools, could result in downward pressure on excess spread and a greater reliance on the respective reserve funds and liquidity facilities, thereby resulting in negative rating actions, in particular for the junior tranches.

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 pool 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 portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Fitch did not undertake a review of information provided about the underlying asset pools ahead of transactions' initial closing. However, prior to the closing of F. Van Lanschot Bankiers N.V.- Conditional Pass-Through Mortgage Covered Bonds programme in April 2015, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated missing documents regarding borrower income and property valuation. These findings were considered by Fitch in this analysis by applying a 5% increase to the base case default probability of all loans in the Citadel transactions.

Also, prior to the closing of F. Van Lanschot Bankiers N.V.- Conditional Pass-Through Mortgage Covered Bonds programme in April 2015, Fitch conducted a review of small targeted sample of origination files and found inconsistencies or missing data related to the underwriting and servicing practices. These findings were considered by Fitch in this analysis by applying additional 5% increase to the base case default probability of all loans in the Citadel transactions.

Overall and together with the assumptions referred to above, 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 European Data Warehouse as of January 2015
- Transaction reporting provided by Intertrust Group as of February 2015

MODELS
The model below was used in the analysis. Click on the link for a description of the model.
ResiEMEA https://www.fitchratings.com/jsp/creditdesk/ToolsAndModels.faces?context=2&detail=135

The rating actions are as follows:
Citadel 2010-I B.V.
Class A2 (ISIN XS0513780592) affirmed at 'AAAsf'; Outlook Stable
Class C (ISIN XS0513780758) affirmed at 'BBBsf'; Outlook Stable

Citadel 2010-II B.V.
Class A (ISIN XS0528006090) affirmed at 'AAAsf'; Outlook Stable
Class C (ISIN XS0528012064) affirmed at 'BBBsf'; Outlook Stable