DBRS Morningstar Upgrades and Confirms Ratings on Cartesian Residential Mortgages 4, 5, and 6 S.A.

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by Cartesian Residential Mortgages 4 S.A. (Cartesian 4), Cartesian Residential Mortgages 5 S.A. (Cartesian 5), and Cartesian Residential Mortgages 6 S.A. (Cartesian 6) (collectively, the Issuers):

Cartesian 4:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (high) (sf)
-- Class C Notes confirmed at AA (sf)
-- Class D Notes upgraded to AA (low) (sf) from A (high) (sf)

Cartesian 5:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AAA (sf) from AA (high) (sf)
-- Class C Notes upgraded to AA (sf) from AA (low) (sf)
-- Class D Notes upgraded to AA (low) (sf) from A (high) (sf)

Cartesian 6:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (high) (sf)
-- Class C Notes upgraded to AA (low) (sf) from A (high) (sf)

The rating on the Class A Notes in each transaction, in addition to the Class B Notes in Cartesian 5, address the timely payment of interest and the ultimate repayment of principal by the final maturity date. The rating on the other classes of notes in each transaction address the ultimate payment of interest and the ultimate repayment of principal while the most junior class and the timely payment of interest when they become the most senior class outstanding.

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses, as of the May 2023 payment date.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

Each transaction is a securitisation of Dutch owner-occupied residential mortgages originated by Venn Hypotheken B.V. (Venn). The portfolios are serviced by Venn; however, primary servicing responsibilities were delegated to Stater Nederland B.V. and special servicing responsibilities were delegated to HypoCasso B.V.

PORTFOLIO PERFORMANCE
Cartesian 4:
As of 30 April 2023, 60- to 90-day delinquencies were 0.1%, up from 0.0% a year prior, and 90+-day delinquencies were 0.0%, stable since a year prior. Cumulative foreclosures were zero.

Cartesian 5:
As of 30 April 2023, 60- to 90-day delinquencies and 90+-day delinquencies were both 0.0%, stable since a year prior. Cumulative foreclosures were zero.

Cartesian 6:
As of 30 April 2023, 60- to 90-day delinquencies were 0.2%, up from 0.0% a year prior, and 90+-day delinquencies were 0.0%, stable since a year prior. Cumulative foreclosures were zero.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables in each transaction and updated its base case PD and LGD assumptions at the B (sf) rating level to the following:
-- Cartesian 4: PD of 1.7% and LGD of 11.1%
-- Cartesian 5: PD of 1.7% and LGD of 10.2%
-- Cartesian 6: PD of 1.6% and LGD of 10.1%

CREDIT ENHANCEMENT
Credit enhancement in each transaction consists of subordination of the junior notes and the reserve fund.

Cartesian 4:
As of the May 2023 payment date, credit enhancement to the Class A, Class B, Class C, and Class D Notes was 13.1%, 9.2%, 6.4%, and 4.6%, respectively, up from 11.0%, 7.6%, 5.3%, and 3.8% at DBRS Morningstar’s initial rating, respectively.

Cartesian 5:
As of the May 2023 payment date, credit enhancement to the Class A, Class B, Class C, and Class D Notes was 11.8%, 7.2%, 5.1%, and 4.2%, respectively, up from 10.4%, 6.3%, 4.5%, and 3.8% at DBRS Morningstar’s initial rating, respectively.

Cartesian 6:
As of the May 2023 payment date, credit enhancement to the Class A, Class B, and Class C Notes was 10.9%, 6.3%, and 3.9%, respectively, up from 10.2%, 5.9%, 4.5%, and 3.7% at DBRS Morningstar’s initial rating, respectively.

Each transaction benefits from a reserve fund that is brought up to its target level in two stages in the revenue priority of payments, which limits the available reserve amounts based on the seniority of the notes. In each transaction, the entire reserve fund is available to cover senior fees, senior swap payments, Class A interest, the Class A principal deficiency ledger (PDL), and Class B interest before being replenished to its first target level. The remaining reserve balance is available to cover interest on the Class C Notes as well as the Class D Notes in Cartesian 4 and Cartesian 5, the Class B and Class C PDLs, and the Class D PDLs in Cartesian 4 and Cartesian 5 before being replenished to its second target level. The Cartesian 4, Cartesian 5, and Cartesian 6 reserve funds are each at their respective target levels of EUR 6.2 million, EUR 4.1 million, and EUR 5.7 million.

Citibank Europe plc - Luxembourg Branch acts as the account bank for each transaction. Based on DBRS Morningstar’s private rating of Citibank Europe plc - Luxembourg Branch, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the Class A Notes in each transaction, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

BNP Paribas SA acts as the swap counterparty for each transaction. DBRS Morningstar's public Long Term Critical Obligations Rating on BNP Paribas SA at AA (high) is consistent with the first rating threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant impact on the credit analysis.

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.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in these transactions are listed at the end of this press release.

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

A review of amended transaction legal documents was conducted in November 2022 in the context of an amendment to each transaction. The amendment involved an increase in the additional purchase cap related to the amount of further advances that may be purchased by the Issuers. A review of the other transaction legal documents was not conducted as they have remained unchanged since the most recent rating actions.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.

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.

The sources of data and information used for these ratings include investor reports provided by Intertrust Administrative Services B.V. and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial ratings, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

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

The last rating action on Cartesian 4 took place on 15 July 2022, when DBRS Morningstar confirmed its ratings on the Class A and Class B Notes at AAA (sf) and AA (high) (sf), respectively, and upgraded its ratings on the Class C and Class D Notes to AA (sf) and A (high) (sf), respectively, from AA (low) (sf) and A (sf), respectively.

The last rating action on Cartesian 5 took place on 2 August 2022, when DBRS Morningstar confirmed its ratings on the Class A and Class B Notes at AAA (sf) and AA (high) (sf), respectively, and upgraded its ratings on the Class C and Class D Notes to AA (low) (sf) and A (high) (sf), respectively, from A (high) (sf) and A (sf), respectively.

The last rating action on Cartesian 6 took place on 10 June 2022, when DBRS Morningstar confirmed its ratings on the Class A, Class B, and Class C Notes at AAA (sf), AA (high) (sf), and A (high) (sf), respectively.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available at www.dbrsmorningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):

-- DBRS Morningstar 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 Issuers at the B (sf) rating level are as follows:
-- Cartesian 4: PD of 1.7% and LGD of 11.1%
-- Cartesian 5: PD of 1.7% and LGD of 10.2%
-- Cartesian 6: PD of 1.6% and LGD of 10.1%

-- The risk sensitivity overview below illustrates the ratings expected if the PD and LGD for Cartesian 4 increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating on the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to remain at AAA (sf).

Cartesian 4:
Class A 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 B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (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 AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

Cartesian 5:
Class A 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 B 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 AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

Cartesian 6:
Class A 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 AA (high) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (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 AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

For further information on DBRS Morningstar 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. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates:
Cartesian 4: 27 June 2019
Cartesian 5: 28 August 2020
Cartesian 6: 21 May 2021

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),
https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.
-- European RMBS Insight Methodology (27 March 2023) and European Asset RMBS Insight Model v6.0.0.0, https://www.dbrsmorningstar.com/research/411634/european-rmbs-insight-methodology.
-- European RMBS Insight: Dutch Addendum (24 April 2023), https://www.dbrsmorningstar.com/research/413034/european-rmbs-insight-dutch-addendum.
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https://www.dbrsmorningstar.com/research/402943/interest-rate-stresses-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021), https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.

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