OREANDA-NEWS. Fitch Ratings has affirmed Hypenn RMBS I B.V. (Hypenn I), Hypenn RMBS II B.V (Hypenn II) and Hypenn RMBS III B.V. (Hypenn III).

The Dutch prime RMBS transactions comprise loans originated by Nationale-Nederlanden Bank (NNB) and Nationale-Nederlanden Leven. The securitised mortgages in Hypenn I are serviced by ING Bank (A/Stable/F1) and in Hypenn II and Hypenn III by NNB.

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

KEY RATING DRIVERS
Asset Performance within Expectations
As of end-October 2015, loans with more than three monthly payments overdue (late arrears) stood at 15bps of the current portfolio balance in Hypenn I, versus the Dutch market average of 60bps. Hypenn II late arrears have increased by 28bps year-on-year and are reported at 36bps. The performance volatility experienced by Hypenn II is justified by the low weighted average seasoning of its portfolio (2.1 years). Hypenn III, which was securitised in April 2015, has not yet recorded any late arrears.

The cumulative balance of mortgages whose collateral has been repossessed and sold remains marginal in Hypenn I (less than 0.1% of the original portfolio). No repossessions have been reported in Hypenn II and III since the transactions closed. The Stable Outlook on the series reflects the limited arrears pipeline and the prime pool characteristics.

Payment Interruption RiskMitigated
Borrowers' payments are due on the last day of each month. Since there is no replacement trigger associated to the seller collection account holder (NN Insurance Eurasia), the risk that monthly collections could be commingled with the bank's insolvency estate following its default is, in Fitch's view, material. The agency factored this risk in its analysis by deducting one month of scheduled principal and interest collections from the available credit enhancement.

The Hypenn deals benefit from non-amortising cash reserves, which can be used towards the payment of senior fees, interest and principal on eligible notes. Only Hypenn III's reserve is below target and will continue to be funded by excess spread up to its target level (1% of class A notes' original balance).

The transactions also feature cash advance facilities, which are provided by Bank Nederlandse Gemeenten (BNG; AA+/Stable/F1+) and are solely dedicated to cover senior fees and interest shortfalls. The cash provided by reserve funds and liquidity facilities is, in Fitch's view, sufficient to guarantee the payments of fees and notes' interest for more than two payment dates, under stressed Euribor assumptions.

NHG-Neutral Performance
NHG loans account for 22.6% and 100% of Hypenn I and Hypenn II's portfolios, respectively. Fitch did not apply a reduction in base foreclosure frequency for the NHG loans, as the historical data received from the originator did not show a difference in the performance of NHG and non-NHG loans. Fitch also used historical claim data received from Waarborgfonds Eigen Wonigen (WEW; AAA/Stable/F1+) to determine the compliance ratio assumption, which led to higher recovery rates for NHG loans.

Hypenn I in Revolving Period
Mortgage principal proceeds will not be used to redeem Hypenn I notes until November 2018. The issuer will use principal collections towards the purchase of new mortgage receivables instead. Fitch analysed the potential shift in the asset pool's characteristics by assuming the worst possible portfolio composition at the end of the revolving period. The analysis shows that the available credit enhancement (10.1%) is sufficient to withstand these stresses.

Insurance Set-off Risk
The intention of insurance policies is that the proceeds of the investments can be used to repay the mortgage loan in full or in part at maturity. In the event that the policy providers are no longer able to meet their obligations, for example as a result of insolvency, borrowers may seek to set-off the claim over the insurance provider against their mortgages, on the basis that the intention is for the loan to be repaid using the proceeds from the policy.

The risk that such set-off could be successfully exercised depends on whether the lender and insurance policy provider are the same legal entity, or whether the mortgage and insurance policies are offered as one product. If they are, Fitch assumes a set-off probability equal to 100%. This figure is reduced to 25% if insurance provider and lender are different institutions or if the mortgage and insurance policy are not a joint product.

Currently, mortgage loans, which have an insurance policy attached, represent 6.4% and 7.4% of the total portfolios in Hypenn I and Hypenn III, respectively. The derived set-off exposure is accounted for in the analysis of the available credit enhancement.

Sufficient Credit enhancement
Fitch believes that the credit enhancement levels, ranging from 7.4% (Hypenn III) to 10.1% (Hypenn I), are sufficient to withstand all the stresses applied during the analysis, as reflected in today's affirmation of the ratings.

RATING SENSITIVITIES
The transactions have material concentration of interest-only loans maturing within a three-year period during the lifetime of the transaction. As per its criteria, Fitch carried out a sensitivity analysis assuming a 50% default probability for these loans. No rating action was deemed necessary as a result of the interest-only loan concentration; nevertheless Fitch will keep monitoring this risk as the transactions amortise.

Deterioration in asset performance may result from macroeconomic factors. 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 actions.

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.

Prior to the transactions' closing, Fitch reviewed the results of third party assessments conducted on the asset portfolio information, which indicated errors or missing data related to property valuation amounts (Hypenn I and Hypenn III) and borrowers' income (all three deals). These findings were considered in this analysis by applying:
-15% haircut to the market value of every 10th loan in the pool in Hypenn I, Hypenn II and Hypenn III;
-10% haircut to the borrowers' income in Hypenn I and Hypenn III;
-10% haircut to the income of every 10th borrower in Hypenn II;

These assumptions are in line with the initial ratings' analysis.

Fitch also applied a lender adjustment factor equal to 1.1, in line with the findings of the latest origination and servicing review dated February 2015.

Prior to the transactions closing, Fitch conducted a review of a small targeted sample of the originators' 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 NNB as at 30 September 2015 (Hypenn I), 31 July 2015 (Hypenn II) and 31 August 2015 (Hypenn III)
-Transaction reporting provided by NNB as at 17 November 2015

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Hypenn I RMBS B.V. - Appendix, dated 10 July 2013; Hypenn II RMBS B.V. - Appendix, dated 16 May 2014 and Hypenn III RMBS B.V. - Appendix, dated 10 April 2015 at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.

Fitch has affirmed the following ratings:

Hypenn RMBS I B.V.
Class A1 (ISIN NL0010511093) affirmed at 'AAAsf'; Outlook Stable
Class A2 (ISIN NL0010511101) affirmed at 'AAAsf'; Outlook Stable
Class A3 (ISIN NL0010511119) affirmed at 'AAAsf'; Outlook Stable

Hypenn RMBS II B.V.
Class A1 (ISIN NL0010739363) affirmed at 'AAAsf'; Outlook Stable
Class A2 (ISIN NL0010739371) affirmed at 'AAAsf'; Outlook Stable
Class A3 (ISIN NL0010739389) affirmed at 'AAAsf'; Outlook Stable

Hypenn RMBS III B.V.
Class A1 (ISIN NL0010511093) affirmed at 'AAAsf'; Outlook Stable
Class A2 (ISIN NL0010511101) affirmed at 'AAAsf'; Outlook Stable