Fitch confirms Hypenn RMBS I
Fitch Ratings has confirmed
The outlook is stable as described below.
RATING ACTIONS
company / debt
evaluation
earlier
A2 NL0010511101
LT
AAAsf
Confirmed
AAAsf
A3 NL0010511119
LT
AAAsf
Confirmed
AAAsf
book page
from 1
VIEW ADDITIONAL REVIEW DETAILS
transaction summary
The Dutch Prime RMBS transaction has been completed
KEY VALUATION DRIVERS
Stable transaction performance: Hypenn I performance has been stable since inception. away
Increased Credit Enhancement: The transaction has been continuously amortized ever since
Risk of netting and commingling: The transaction has a mechanism whereby the seller posts collateral equal to the risk of netting if it exceeds 0.5% of the portfolio balance. The total balance of deposits related to borrowers in the pool reached 0.3%
The transaction also poses a risk of commingling of upfront payments that could be lost in the estate of an insolvent servicer. We have calculated an average commingling loss of 0.8% of the portfolio balance, which we include as a Day 1 loss along with the 0.3% deposit elimination rate.
Mortgage Rate Reset Risk: The pool consists almost entirely of fixed rate loans and the interest payable on the notes is also fixed. In line with its European RMBS criteria, Fitch has tested a scenario in which borrowers renegotiate lower interest rates on their loan reset dates, resulting in a reduction in portfolio returns. This downward pressure has become even more severe with the revised interest rate criteria and resulted in the Notes being placed on UCO. However, analysis shows that debt security ratings are able to withstand greater rate compression.
VALUATION SENSITIVITIES
Factors that individually or collectively could result in a negative rating action/downgrade:
A deterioration in asset performance may result from macroeconomic factors. A corresponding increase in foreclosures and associated pressure on excess spreads and reserve funds beyond Fitch’s assumptions could result in negative rating action.
Factors that individually or collectively could result in a positive rating action/upgrade:
Grades are rated at the highest level on the Fitch scale and cannot be upgraded.
Best/worst case evaluation scenario
Internationally scaled structured finance transaction credit ratings have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions measured in the positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions measured in a negative direction) of seven notches over three years. The full range of best and worst case ratings for all rating classes ranges from “AAAsf” to “Dsf”. Credit ratings for best and worst case scenarios are based on historical performance. For more information on the methodology used to determine industry credit ratings for best and worst case scenarios, please visit https://www.fitchratings.com/site/re/10111579.
SEC RULE 17G-10 USE OF THIRD PARTY DILIGENCE CHECKS
The ABS Due Diligence-15E form was not provided to or reviewed by Fitch in connection with this rating action.
ADEQUACY OF DATA
Fitch has verified the consistency and plausibility of the information received regarding the performance of the asset pool and the transaction. Fitch has not verified the results of any third party assessment of the asset portfolio information or reviewed the origination files as part of its ongoing monitoring.
The ABS Due Diligence-15E form was not provided to or reviewed by Fitch in connection with this rating action
Prior to closing the transaction, Fitch reviewed the results of a third-party assessment performed on the asset portfolio information, which identified errors or missing data related to the borrower’s income and property valuation information. These findings were taken into account in the first analysis through adjustments. However, in its current analysis, Fitch is discontinuing the application of these adjustments in line with the removal of the originator adjustment due to the solid performance of this proven transaction.
Prior to closing the transaction, Fitch conducted a review of a small targeted sample of the originator’s origination files and determined that the information contained in the reviewed files was reasonably consistent with the originator’s policies and practices and other information available to the agency about the asset were made available portfolio.
Taken together, and together with all of the above assumptions, Fitch’s assessment of the information on which the Agency’s rating analysis is based in accordance with its applicable rating methodology indicates that it is reasonably reliable.
REFERENCES FOR KEY SIGNIFICANT SOURCE IDENTIFIED AS KEY DRIVERS OF REVIEW
The main sources of information used in the analysis are described in the Applicable Criteria.
ESG considerations
Unless otherwise stated in this section, the highest level of ESG credit relevance is a score of “3”. This means that ESG issues are credit neutral or have minimal credit impact on the business, either because of their nature or how they are managed by the business. For more information on Fitch’s ESG relevance scores, visit www.fitchratings.com/esg
For more information, visit www.fitchratings.com