DBRS Morningstar Publishes Final Methodology on European RMBS Insight: Spanish Addendum

DBRS Morningstar finalised its “European RMBS Insight: Spanish Addendum” methodology (the Methodology) on 26 August 2020.

The Methodology presents the criteria for which Spanish residential mortgage-backed securities ratings and, where relevant, Spanish covered bond ratings, Spanish structured credit ratings, and Spanish nonperforming loan securitisation ratings are assigned and/or monitored.

DBRS Morningstar has updated its house price indexation and market value decline rates to reflect data through the fourth quarter of 2019. Such periodic updates are also included in the “European RMBS Insight Methodology”. DBRS Morningstar also updated its market value declines for Spain at a national level and for each of its autonomous regions.

The distressed sale assumptions (DSD) remain unchanged, but DBRS Morningstar intends to apply lender-specific DSD assumptions where data for the specific lender is available.

Other amendments include a change in the forecast horizon to 30 years from 20 years, and, in the European RMBS Insight Model, the added functionality to analyse second-charge loans and the added functionality for analysts to make analytical assumptions where income data is missing.

These updates are deemed to be material as the assumptions changed are considered key assumptions.

The Methodology supersedes the prior version published on 10 July 2019 and is effective as of 26 August 2020.

No ratings are expected to change as a result of this update.

DBRS Morningstar published a document outlining the comments received, as well as DBRS Morningstar’s responses for the comment period ending 17 August 2020 related to the DBRS Morningstar “European RMBS Insight: Spanish Addendum” methodology. The comments were received from a market participant who requested not to be named.

Notes:

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

DBRS Morningstar methodologies are publicly available on its website www.dbrsmorningstar.com under Methodologies & Criteria.

For more information on this methodology, or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected]