OREANDA-NEWS. September 22, 2015.  Fitch Ratings has affirmed Belgian Lion N.V./S.A. Compartment Belgian Lion RMBS I's class A notes (ISIN BE0002383553) at 'AAAsf' with a Stable Outlook.

The RMBS transaction consists of prime Belgian residential mortgage loans originated and serviced by ING Belgium (A/Stable/F1). The revolving period ended in February 2013.

KEY RATING DRIVERS
Deteriorating Asset Performance
The volume of gross cumulative defaults is relatively high compared with the average for Belgian prime transactions (1.1%) at 3.4% of the initial pool balance, as a result of the relatively conservative default definition that includes loans in arrears by more than three months. However, approximately 40% of these defaulted loans have subsequently returned to performing status.

Fitch has observed a deterioration in performance in the past 12 months, with the number of properties liquidated with a loss increasing to 102 from 42 and realised losses almost doubling to EUR5.2m. Approximately one-quarter of the outstanding defaulted loans are currently in liquidation so Fitch expects the realised losses to increase at a similar pace in the coming months.

Nevertheless, the analysis found that the credit enhancement for the class A notes has built up sufficiently to pass the relevant rating stresses, resulting in their affirmation.

Recovery Rate Cap
In its analysis, Fitch applied a recovery rate cap based on the default and recovery information reported in the quarterly investor reports.

Outstanding Class B PDL
The transaction provisions for losses through the principal deficiency ledger (PDL) for the unrated class B notes. As the reserve fund cannot be used to replenish the class B PDL and the swap does not provide any excess spread, the PDL on the class B notes has continued to build up to EUR5.2m as of end-May 2015, representing 1% of the class B balance.

RATING SENSITIVITIES
ING Belgium currently performs all the counterparty roles in the transaction. Deterioration in ING Belgium's credit profile could consequently affect the operational performance of the deal.

As of end-May 2015, loans in the process of liquidation represent approximately one-quarter of gross cumulative defaults. The reported losses on the sold properties have remained low relative to the transaction size. However, unexpectedly large further deterioration could result in liquidity pressure and negative rating action.

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 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 European Data Warehouse as at 30 April 2015
- Transaction reporting provided by ING Belgium as at 26 May 2015

MODELS
The models below were used in the analysis. Click on the link for a description of the model.
- EMEA RMBS Surveillance Model