OREANDA-NEWS. Fitch Ratings has affirmed Cartesian Residential Mortgages 1 S.A. (CRM1). CRM1 is a securitisation of Dutch prime residential loans originated, mainly prior to 2008, by GE Artesia Bank.

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

KEY RATING DRIVERS
High Foreclosures
Reported foreclosures to date have been fairly high (at 1.07%) given that the transaction closed only two years ago.

Fitch understands from Venn Partners (which provides advice to the servicer, Quion Groep (RPS2+, RSS2)) that the foreclosure data captures not just involuntary sales by distressed creditors but also voluntary sales where the loan balance is fully repaid following both the sale of the property as well as the unwinding of any payment vehicles associated with the mortgage.

Fitch estimates the adjusted cumulative default rate at 0.4%, higher than that exhibited by its other rated transactions of the same vintage (average 0.26%) but not at a level that would cause the agency to take a negative rating action.

Strong Credit Enhancement
Credit enhancement for the B and C notes at 13.9% and 10.8% respectively are fairly strong for the junior tranches. However, given the limited asset performance history (less than two years since closing) and the higher rates of default than other Fitch-rated transactions of the same vintage, no positive rating action has been taken on the junior notes.

Underwriting Risks
At transaction close, the origination and underwriting criteria of GE Artesia were considered to be in line with other lenders in the Dutch market. However, Fitch notes a lack of quality control over underwriting operations as well as a lack of clear policy or procedures on exception reporting/tracking. This, together with the seasoning of the pool (105 months at closing) and the performance to date, has led Fitch to apply a 5% underwriting discount in line with peers.

Insurance Set-off
Of the pool 19.2% has either a life insurance or a hybrid vehicle attached to the loan. Fitch assesses the probability of insurance set-off arising from insolvency of the insurance provider by factoring in affiliation with the originator as well as the diversity of insurance providers. The low prepayment and front-loaded default scenario was used in line with the approach taken at transaction close. This scenario is the most stressful, as the total amount accumulating in the insurance policies would be highest towards the end of the transaction.

RATING SENSITIVITIES
Poor asset performance, resulting in higher defaults and worse arrears performance than in Fitch's stresses, could lead to negative rating actions.
Conversely, improving asset performance, especially in light of the strong credit enhancement available to the junior notes, may lead to positive rating action on the class B and C notes.

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.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated errors or missing data related to the foreclosure valuations. These findings were considered in this analysis by applying a 15% haircut to the foreclosure valuation of 2% of the pool (applied on a random basis) in line with closing.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of GE Artesia Bank'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, 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 from the European Data Warehouse as at 31 December 2015
-Transaction reporting provided by Intertrust Administrative Services as at 31 December 2015
-Loan enforcement details provided by Venn Partners as at 31 December 2015
-Further discussions with Venn Partners as at 25 February 2016

Fitch has affirmed the following ratings:

Class A (ISIN XS1024418185) affirmed at 'AAAsf'; Outlook Stable
Class B (ISIN XS1024423425) affirmed at 'AA-sf'; Outlook Stable
Class C (ISIN XS1024434620) affirmed at 'Asf'; Outlook Stable