DBRS Confirms Rating on MondoMutui Cariparma S.r.l. - Series 2012

DBRS Ratings Limited (DBRS) has today confirmed its AAA (sf) rating on the EUR 1,576,040,768.30 Class A Notes issued by MondoMutui Cariparma S.r.l. - Series 2012 (the Issuer).

The rating action reflects an annual surveillance review of the transaction, based upon the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the October 2015 payment date.
-- Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Incorporation of a sovereign-related stress component to address the impact of macroeconomic variables on collateral performance given the long-term foreign and local currency rating of A (low) for the Republic of Italy.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested;
-- The current available credit enhancement to the Class A Notes to cover expected losses assumed in line with the AAA (sf) rating level.

The ratings of the Class A Notes address the timely payment of interest and the ultimate payment of principal on or before the Legal Maturity Date in April 2060.

The Issuer is an Italian securitisation collateralised by a portfolio of first lien residential mortgage loans granted by Cassa di Risparmio di Parma e Piacenza S.p.A. (Cariparma). The transaction follows the standard structure under the Italian securitisation law and closed in February 2012.

The transaction is backed by loans secured by properties mainly located in the North and Centre of Italy, in particular in the regions of Lombardy and Emilia-Romagna (representing 59.7% of the current portfolio). 96.3% of the current portfolio was originated between 2009 and 2011, coincident with the peak of the Italian residential housing market. Therefore, the current loan-to-value distribution, based on the most recent property valuations, is more concentrated in the higher buckets, when compared with the distribution at closing.

The portfolio is performing in line with DBRS’s expectations. As of the October 2015 payment date, total delinquencies were 3.5% of the portfolio principal balance. The gross cumulative default ratio was 1.6% of the original portfolio balance, with cumulative recoveries of 37.3%.

Credit enhancement for the Class A Notes, currently at 22.3%, is provided by the subordination of the Class J Notes.

The transaction structure includes a Liquidity Reserve available to cover senior expenses and missed interest payments on the Class A Notes. This facility amortises up to a maximum aggregate amount of 3.2% of the outstanding balance of Class A Notes and it is currently funded at with EUR 62.6 million.

A swap structure is in place to hedge the interest rate mismatch between the notes, indexed to 6-month Euribor, and the interest rate payments from the collateral portfolio. Cariparma is the Counterparty of the Hedging Agreement.

Cariparma also acts as Account Bank for this transaction. The DBRS private rating of Cariparma complies with the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in DBRS’s Legal Criteria for European Structured Finance Transactions methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. This may be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by Cariparma and data from the European DataWarehouse GmbH.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 16 April 2015, when DBRS confirmed the rating of the Class A Notes at AAA (sf). The lead responsibilities for this transaction have been transferred to Joana Seara da Costa.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the current receivables. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.

-- The base case PD and LGD of the current pool of mortgages for the Issuer are 10.87% and 25.09%, respectively. At the AAA (sf) rating level, the corresponding PD is 37.82% and the LGD is 45.76%.

-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain to AAA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Administration (ESMA) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Konstantine Pastras
Initial Rating Date: 24 May 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Joana Seara da Costa
Rating Committee Chair: Quincy Tang

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The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Unified Interest Rate Model for European Securitisations

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375