OREANDA-NEWS. Fitch Ratings has affirmed PEARL Mortgage Backed Securities 1 B.V. (Pearl 1) and PEARL Mortgage Backed Securities 2 B.V. (Pearl 2). A full list of rating actions is at the end of this rating action commentary.

The transactions comprise Dutch mortgages backed by the Nationale Hypotheek Garantie (NHG) and originated by SNS Bank (BBB/Stable/F3).

KEY RATING DRIVERS
Stable Performance
Loans in late-stage arrears across the two transactions have decreased over the past year. As of the latest reporting periods, three-months plus arrears stood at 0.36% and 0.64% of the current collateral balance in Pearl 1 and 2, respectively, compared with 0.8% for both transactions 12 months earlier. Pearl 1's arrears are lower than the average three-months plus arrears in NHG transactions (0.42%) and below the average of all Fitch-rated Dutch RMBS transactions (0.7%) for both transactions. The stable performance is reflected by the affirmations.

Since closing in 2006 (Pearl 1) and 2007 (Pearl 2), no losses have been reported. Defaulted loans have been covered by the NHG guarantee or repurchased by SNS Bank in accordance with its commitment to repurchase loans ineligible for the guarantee. Fitch expects this to remain the case as reflected by the Stable Outlooks on the notes in both deals.

Commingling Collateral
SNS Bank has deposited reserves to mitigate commingling risk in case it defaults. The dynamic commingling reserve is 1.5x the average portfolio collections over the past 12 months for both transactions. As of the latest reporting periods, the reserves posted at Rabobank Group (AA-/Negative/F1+) were EUR15.2m for Pearl 1 and EUR9.9m for Pearl 2. Fitch believes that the collateral posted is sufficient to mitigate the commingling risk in both transactions.

RATING SENSITIVITIES
Deterioration in asset performance may result from macroeconomic factors such as increased unemployment. A corresponding increase in new foreclosures and the associated pressure on excess spread, reserve fund and liquidity facility beyond Fitch's assumptions could result in negative rating action, particularly for the junior tranches. However, the presence of the NHG and buyback commitment for non-eligible defaulted loans makes the ratings less sensitive to deterioration in asset performance.

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 transactions. 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 pools ahead of the transactions' initial closing. The subsequent performance of the transactions 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 SNS Bank N.V. and sourced from the European Data Warehouse with a cut-off dates of August 31 2015 for both deals.
-Transaction reporting provided by Intertrust Administrative Services B.V. since the close of the deals and until August 2015 for Pearl 1 and July 2015 for Pearl 2
-Fitch analysts held an update call with representatives of SNS to discuss origination and servicing practices in June 2015