DBRS Confirms Ratings on FCT Marsollier Mortgages

DBRS Ratings Limited (DBRS) confirmed its AAA (sf) ratings on the Class D and Class E notes (together, the Rated Notes) issued by FCT Marsollier Mortgages (the Issuer).

The ratings address the timely payment of interest and ultimate payment of principal on or before the final legal maturity date in September 2050.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies, defaults and losses.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- The credit enhancement available to the notes to cover the expected losses at their respective rating levels.

The Issuer is a securitisation of French residential mortgage loans originated by Bearimmo (acquired previously by JP Morgan Dublin Bank) and granted to borrowers in the non-conforming segment of the French mortgage market. The portfolio is serviced by MCS & Associés SA.

On 12 August 2019, DBRS transferred the ongoing coverage of the ratings assigned to the Issuer to DBRS Ratings Limited from DBRS Ratings GmbH. The lead analyst responsibilities for this transaction have been transferred to Natalia Coman.

Both DBRS Ratings Limited and DBRS Ratings GmbH are registered with the European Securities and Markets Authority (ESMA) under Regulation (EC) No. 1060/2009 on Credit Rating Agencies, as amended, and are registered Nationally Recognized Statistical Rating Organization (NRSRO) affiliates in the United States and Designated Rating Organization (DRO) affiliates in Canada.

PORTFOLIO PERFORMANCE
As of the July 2019 payment date, loans more than 90 days delinquent represented 0.3% of the outstanding portfolio balance and the cumulative default rate represented 22.7% of the original portfolio balance. Both arrears and defaults remained within DBRS’s expectations.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 75.1% and 27.0%, respectively.

CREDIT ENHANCEMENT
As of the July 2019 payment date, the credit enhancement (CE) available to the Class D notes increased to 96.6% from 76.7% 12 months prior. The CE available to the Class E notes increased to 67.8% from 52.4% 12 months prior. The sources of CE are the subordinated notes.

The transaction benefits from a non-amortising liquidity reserve, currently at its target amount of EUR 6.5 million, available to cover shortfalls in senior fees and interest on the Rated Notes.

BNP Paribas Securities Services, SCA (BNPSS) acts as the account bank for the transaction. Based on the DBRS private rating of BNPSS, the downgrade provisions outlined in the transaction documents and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the Rated Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The transaction structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda”.

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 legal 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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: https://www.dbrs.com/research/333487/rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports provided by France Titrisation and loan-level data from European DataWarehouse GmbH.

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

At the time of the initial rating, DBRS was supplied with 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 these ratings to be of satisfactory quality.

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

The last rating action on this transaction took place on 17 August 2018, when DBRS upgraded the Class D notes and the Class E notes to AAA (sf) from AA (high) (sf) and AA (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Natalia Coman.

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):
-- DBRS expected a lifetime base case PD and LGD for the 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 of the current pool of loans for the Issuer are 75.1% and 27.0%, respectively.
-- 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 50.0%, the rating of the Class D notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50.0%, the rating of the Class D notes would be expected to remain at AAA (sf), assuming no change in the PD. Furthermore, if both the PD and the LGD increase by 50.0%, the rating of the Class D notes would be expected to remain at AAA (sf).

Class D 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)

Class E 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 AA (high) (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 AA(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: Natalia Coman, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 10 August 2012

DBRS Ratings Limited
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Ratings issued and monitored by DBRS Ratings Limited are noted as such on the DBRS website; however, the language and related statements in previously published press releases in respect of the relevant ratings will not be changed retroactively and will remain as part of DBRS’s historical record. The ratings issued and monitored in the European Union are marked as such in their respective rating tables. As part of this transfer, these markings will remain unchanged on all active ratings related to the Issuers.

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

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

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.