DBRS Morningstar Requests Comments on Three Proposed Changes to Appendix 3 to the Common RMBS Rating Methodology

DBRS Morningstar is requesting comments on the following three proposals:

(1) To withdraw the Belgium Addendum to the “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda” and to begin applying the “Common RMBS Rating Methodology” for residential mortgage-backed securities (RMBS) and, where relevant, Belgian covered bond issuances backed by Belgian mortgage portfolios. DBRS Morningstar is also proposing to update the Belgian market value decline (MVD) assumptions applicable to Belgian mortgage portfolios. In addition to RMBS and covered bonds, DBRS Morningstar uses the MVD assumptions to rate small and medium-size enterprise (SME) collateralised loan obligation (CLO) transactions in Belgium.

(2) To withdraw the German Addendum to the “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda” and to begin applying the “Common RMBS Rating Methodology” for RMBS and, where relevant, German covered bond issuances backed by German mortgage portfolios. DBRS Morningstar is also proposing to update the German MVD assumptions applicable to German mortgage portfolios. In addition to RMBS and covered bonds, DBRS Morningstar uses the MVD assumptions to rate SME CLO transactions in Germany.

(3) To update the Greek MVD assumptions in section 3.1 under Appendix 3 to its “Common RMBS Rating Methodology” for RMBS and, where relevant, Greek covered bond issuances backed by Greek mortgage portfolios. In addition to RMBS and covered bonds, DBRS Morningstar also uses the MVD assumptions to rate nonperforming loan securitisations in Greece.

The proposed new “Common RMBS Rating Methodology” may supersede the version published on 25 May 2022.

Following the expiration of the request for comment period, DBRS Morningstar intends to rate Belgium and Germany issuances backed by residential mortgage portfolios within the framework set out in the “Common RMBS Rating Methodology” and would simultaneously withdraw both the Belgium Addendum and German Addendum to the “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda”. The new Belgian and German MVD assumptions will be included in the “Common RMBS Rating Methodology” as sections 3.2 and 3.3, respectively, under Appendix 3.

DBRS Morningstar currently rates four SME CLOs with Belgian assets, three covered bonds backed by German mortgages, and one German RMBS transaction. DBRS Morningstar does not expect any rating impact on these outstanding securitisations as a result of the proposed change in methodology.

DBRS Morningstar currently rates one Greek covered bond transaction, the Piraeus Bank SA Global Covered Bonds Programme, and expects the proposed changes to have a potential positive rating impact of one notch compared with the current rating.

Comments should be received on or before 12 September 2022. Please submit your comments to the following email address: [email protected].

DBRS Morningstar publishes on its website all comments received, except in cases where confidentiality is requested by the respondent.

Notes:
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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].