DBRS Confirms Ratings of CFHL-2 2015

DBRS Ratings Limited (DBRS) has today confirmed the ratings of the notes issued by CFHL-2 2015 as follows:

-- Class A1 at AAA (sf)
-- Class A2-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BB (sf)

Today’s rating actions are based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults.
-- Portfolio probability of default (PD) rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current credit enhancement (CE) available to the rated notes to cover the expected losses at their respective rating levels.

CFHL-2 2015 closed in August 2015 and is a securitisation of French home loans originated and serviced by Crédit Foncier de France SA (Crédit Foncier). The home loans are fully drawn fixed-rate loans for home purchase or construction financing. The construction projects were completed before their loans were sold to the transaction. In addition, as of 31 May 2016, 30.65% of the outstanding loans were guaranteed by Crédit Logement SA (rated AA (low), with a Stable trend by DBRS).

The asset portfolio is performing within DBRS’s expectations. As of 31 May 2016, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance were at 0.35%, and loans more than 30 days delinquent were at 1.41%. The outstanding default ratio was 0.10%. DBRS has maintained the base case PD and LGD assumptions for the remaining collateral pool at 3.53% and 16.84%, respectively.

The CE available to all the rated notes has increased as the transaction deleverages. The sources of CE to each note are the overcollateralisation, the subordinated notes and the General Reserve Fund. The overcollateralisation is building up through the payments of the Turbo Amortisation Amount to the junior notes and is currently in the amount of EUR 15 million. The General Reserve Fund is currently at its non-amortising target amount of EUR 6.8 million. As of the 28 June 2016 payment date, the CEs available to Class A1, A2-A, B, C, D and E are 17.64%, 17.64%, 10.53%, 7.32%, 4.66% and 2.15%, respectively.

Crédit Foncier is the Account Bank and the Swap Counterparty to the transaction and its current DBRS private rating meets the Minimum Institution Rating criteria given the ratings assigned to the Class A1 and A2-A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” and “Derivative Criteria for European Structured Finance Transactions” methodologies.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

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. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

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

The sources of information used for this rating include the investor reports provided by Euro Titrisation and the loan by loan data from 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 5 August 2015, when DBRS finalised the provisional ratings on the notes. The lead responsibilities for this transaction have been transferred to Kevin Ma.

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 base case PD and LGD for the remaining collateral pool based on a review of the current assets. 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 assumptions for the remaining collateral pool are 3.53% and 16.84%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.91% and the LGD is 43.02%. At the AA (sf) rating level, the corresponding PD is 19.79% and the LGD is 33.09%. At the A (sf) rating level, the corresponding PD is 15.45% and the LGD is 28.97%. At the BBB (sf) rating level, the corresponding PD is 10.96% and the LGD is 24.90%. At the BB (sf) rating level, the corresponding PD is 6.04% and the LGD is 20.17%.

-- 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 on Class A1 would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on Class A1 would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on Class A1 would be expected to be at AA (high) (sf).

Class A1 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 AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class A2-A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Class B Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

Class C Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

Class D Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)

Class E Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD, expected rating of BB (sf)
-- 50% increase in PD, expected rating of BB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Authority (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: Keith Gorman
Initial Rating Date: 16 June 2015
Initial Rating Committee Chair: Diana Turner

Lead Surveillance Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Senior Vice President

DBRS Ratings Limited
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London EC3M 3BY
United Kingdom
Registered in England and Wales: No. 7139960

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

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