OREANDA-NEWS. Fitch Ratings has affirmed two tranches of Beluga Master Issuer, a securitisation programme of Dutch residential mortgages originated by subsidiaries of ABN AMRO Bank N.V. (A/Stable/F1). The rating actions are as follows:

Beluga Master Issuer B.V. 2012-1
Class A (XS0775122509) affirmed at 'AAAsf'; Outlook Stable

Beluga Master Issuer B.V. 2006-1
Class A (XS0276518288) affirmed at 'AAAsf'; Outlook Stable

KEY RATING DRIVERS
Improved Arrears Performance
The affirmations reflect satisfactory current performance and credit enhancement in the transaction. Fitch has observed a significant decrease in both early- and late-stage arrears over the last 12 months. As of the July 2015 payment date, loans in arrears by three months or more stood at 0.89% of the outstanding collateral balance, down from 1.1% in October 2014. The loans in arrears by one to two months were 0.28%, a decrease of 20bps over the same period.

The reduction of early-stage arrears is caused by both borrowers returning to performing status and a reduced inflow of new arrears due to an improving Dutch economy. The decrease of late-stage arrears on the other hand is the result of a higher level of foreclosures, triggered by the recovering Dutch housing market. Given the overall decreasing arrears trend, Fitch expects the pace of new defaults to slow down.

Fitch has applied the performance adjustment factor (PAF) implied by EMEA RMBS Surveillance Model in the analysis. Even though the transaction reported an increase in foreclosures, Fitch is of the opinion that the future default probability is sufficiently captured in the criteria-implied expected case default probability.

Insurance Set-Off
The mortgages backed by capital insurance policies are exposed to the risk that, upon insolvency of the policy providers, borrowers may seek to set-off against their mortgages the claim over the insurance provider resulting from a loss of premium or damages. Further to this, borrowers could seek to exercise defences following the insolvency of their insurance provider and request cancellation of parts of the loans corresponding to the lost capital. Fitch incorporated in its analysis the risk that borrowers might exercise such defences following the failure of insurance providers. The agency estimated the set-off exposure and accounted for the exposure in the EMEA RMBS Surveillance Model.

Interest-only Concentration
Fitch has analysed the concentration of interest-only (IO) loan maturities to assess the effect of a period of limited lending availability coinciding with a significant proportion of expected bullet repayments. In the transaction, the IO loans maturing within a three-year period throughout the lifetime of the transaction account for more than 20% of the portfolio balance. To account for this risk a sensitivity analysis was conducted, by increasing the foreclosure frequency (FF) on the concentrated portion of loans to 50% from the model-implied FF. The ratings implied by the sensitivity analysis were not considered substantially different, thus no adjustment to the ratings was made.

RATING SENSITIVITIES
Deterioration in asset performance and an increase in new defaults and associated pressure on excess spread levels and the reserve fund beyond Fitch's stresses could result in 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. The employment information in the pool tape was missing for all the borrowers. Given the borrower characteristics at close, Fitch has assumed the borrowers to be self-employed. 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.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

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 at 3 August 2015
-Transaction reporting provided by ABN AMRO Bank N.V. as at 31 July 2015