Press Release

DBRS Morningstar Releases Commentary on the Impact of a New Catalonian Decree Law on Spanish RMBS and NPL Transactions

RMBS, Covered Bonds, Nonperforming Loans
April 06, 2020

DBRS Morningstar released a commentary titled, “New Catalonian Social Rent Decree Risks Delay of Recoveries in Spanish RMBS and NPLs”, which highlights the potential impact of a new Catalonian affordable housing law on residential mortgage-backed securities (RMBS), nonperforming loans (NPLs), and covered bonds markets.

Key highlights include

-- A summary of the most relevant changes on social leases introduced by the new Catalonian Decree-Law in order to promote access to affordable housing for households at risk of residential exclusion.
-- The potential impact of these changes on the recovery lag of RMBS and NPL transactions with high exposures to Catalonia in their collateral pools, with borrowers who have high loan-to-value and comply with the income requirements to apply for a social lease.
--Our expectation that the impact of the new Catalonian Decree-Law will still be limited for RMBS and NPL transactions, as most servicers will continue to offer borrowers under financial distress, restructuring measures to avoid the lengthy judicial process to take properties into possession. Most borrowers will be expected to request additional measures to pay because if they opt for a social lease they will lose ownership of the property.
--Our expectation that the law’s impact will be minimal on covered bonds transactions since pools are regionally diversified.

The full commentary is available at

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