DBRS Assigns Rating to Securitised Residential Mortgage Portfolio I B.V. (SRMP I B.V.)

DBRS Ratings Limited (DBRS) assigned the following rating to the Class A Notes issued by Securitised Residential Mortgage Portfolio I B.V. (SRMP I B.V. or the Issuer):

-- EUR 910,800,000 Class A Notes at AAA (sf)

SRMP I B.V. is a securitisation of a portfolio of Dutch prime residential mortgage loans originated by Achmea Bank N.V. (Achmea) and its subsidiaries (the Seller). Achmea has appointed Quion Services B.V. as its sub-agent to carry out all primary servicing activities.

The rating addresses the timely payment of interest and the Issuer’s obligation to repay principal on the Class A Notes at the maturity date in accordance with transaction documents. DBRS does not rate the EUR 130,200,000 Class B Notes or the EUR 23,200,000 Class C Notes. The rating does not address the Class A Excess Consideration and the Class A Additional Amount due to the Class A note holders on each payment date after the September 2023.

The purchase of the initial portfolio is funded through the issuance of the Class A and Class B Notes, with the cash reserve fully funded at EUR 15,700,000 (1.5% of the Class A and Class B Notes outstanding balance) via the Class C Notes. The Class A Notes benefit from 14.0% credit enhancement from the Class B Notes and the reserve fund. The cash reserve provides credit support to cover senior fees, Class A Notes interest and principal shortfall. Additional liquidity support for the Class A Notes is provided by the cash advance facility sized at 2.0% of the Class A and Class B Notes. If Achmea’s creditworthiness deteriorates, the Issuer is entitled to withdraw the entire undrawn of the cash advance facility account.

As of April 2018, the mortgage portfolio had a balance of EUR 1.04 billion and was more than 11 years seasoned. DBRS calculates the weighted-average current loan to market value (WA CLTMV) of the portfolio as 86.8%. The Indexed WA CLTMV is 89.5%.

The portfolio contains 57.0% interest-only mortgage loans, as well as other types of mortgage loans where the repayment vehicle may not in all cases provide for the repayment in full of principal such as savings mortgage loans (8.1%), life mortgage loans (21.0%) and investment mortgage loans (2.2%). The remaining 11.6% are repayment mortgage loans.

The weighted-average coupon of the mortgage portfolio is 3.56%. Dutch borrowers tend to favour longer-term fixed-rate products, where mortgage interest rates tend be relatively higher than floating-rate loans. The current fixed-rate proportion in the portfolio is 88.5%. The interest payable on the rated Class A Notes is floating at three-month Euribor plus 0.15%, subject to the step-up margin rate of 0.30% on the first optional redemption date (FORD) in September 2023. The interest rate risk has been partly mitigated by an interest rate cap and through subordination of note interest above 5.0% following the FORD.

There are a number of different sources of set-off risk in the Dutch mortgage market, and although Sub-Participation agreements partially mitigate the set-off risk within the transaction, DBRS has stressed cash flows for set-off risk where this risk remains.

The rating is based upon review by DBRS of the following analytical considerations:

-- The transaction’s cash flow structure and form and sufficiency of available credit enhancement. Credit enhancement for the Class A Notes is provided in the form of subordination via the Class B Notes and the non-amortising reserve fund. At closing, DBRS calculates the credit enhancement level at 14.00%. The calculation includes the reserve fund, which represents 1.5% of the portfolio balance. Excess spread may also be available; however, the availability of excess spread is determined by the performance of the portfolio.

Liquidity coverage is provided through the non-amortising reserve fund and cash advance facility. The cash advance facility is available to pay senior fees and interest on the Class A Notes in the event of an interest shortfall.

-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents. The transaction cash flows were analysed using portfolio default rates and loss-given default outputs provided by the European RMBS Insight model. Interest payable on the Class A Notes is floating, with 88.5% of the portfolio balance linked to a fixed rate of interest, and the remaining portion linked to a floating Standard Variable Rate. The Issuer account bank has the right to charge negative interest rates, and the cash flow assumptions were stressed to assess the risk of negative interest rates on the Issuer account bank. The transaction cash flows were modelled using Intex. DBRS considered an additional sensitivity scenario of a 0% conditional prepayment rate (CPR) stress. The Class A Notes passed DBRS’s AAA stresses in all 0% CPR scenarios.

-- The credit quality of the expected mortgage loans against which the Class A Notes are secured and the ability of the servicer to perform collection activities on the collateral. The Probability of Default (PD) and Loss Given Default (LGD) are based on an assessment of the loan-by-loan data provided by Achmea. The mortgage portfolio was assigned an underwriting score of medium and a benchmark of good in the European RMBS Insight model.

-- ABN Amro Bank N.V. and ING Bank N.V. act as the collection account providers for the transaction. The transaction documents do not include DBRS rating and downgrade provisions for the collection account providers, and additional stress has been applied in the cash flow analysis.

-- N.V. Bank Nederlandse Gemeenten and Société Générale S.A., Amsterdam Branch act as the Issuer account bank and the Issuer back-up account bank for the transaction, respectively. DBRS’s private ratings on these entities comply 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.

-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and the consistency with the DBRS “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “European RMBS Insight Methodology” and “European RMBS Insight: Dutch Addendum”.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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.

The sources of data and information used for this rating include Achmea Bank N.V. and its representatives.

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

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

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

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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):

-- In respect of the Class A Notes, the PD and the LGD at AAA (sf) stress scenario of 24.41% and 35.16%, respectively.

DBRS concludes the following impact on the Class A Notes:

-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to AA (sf).
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to A (high) (sf).
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (sf).
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf).
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf).
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (sf).
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf).
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).

For further information on DBRS historical 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 and US regulations only.

Lead Analyst: Rehanna Sameja, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 1 June 2018

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor, London EC3M 3BY United Kingdom
Registered in England and Wales: No. 7139960

-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
-- European RMBS Insight Methodology
-- European RMBS Insight: Dutch Addendum

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

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.