Morningstar DBRS Finalises Its Provisional Credit Ratings on Tulip Mortgage Funding 2024-1 B.V.

DBRS Ratings GmbH (Morningstar DBRS) finalised its provisional credit ratings on the following classes of notes issued by Tulip Mortgage Funding 2024-1 B.V. (TMF 2024-1 or the Issuer):

-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (low) (sf)

The final credit rating on Class A Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The final credit rating on the Class B notes addresses the timely payment of interest once they are the most-senior class and the ultimate repayment of principal on or before the final maturity date. The final credit rating on the Class C notes addresses the ultimate repayment of interest and principal on or before the final maturity date. Morningstar DBRS' credit ratings do not address the payment of the subordinated step-up margin. Morningstar DBRS does not rate the Class D, Class E, Class X, and Class R notes issued in the transaction.

CREDIT RATING RATIONALE
TMF 2024-1 is a bankruptcy-remote special-purpose vehicle incorporated in the Netherlands. The Issuer issued four collateralised tranches (the Class A to Class D notes) to finance the purchase of Dutch residential mortgage loans secured over first-lien, owner-occupied properties located in the Netherlands. Additionally, TMF 2024-1 issued the noncollateralised Class E notes to fully fund the general reserve fund (GRF) to 1.0% of the outstanding balance of the Class A, Class B, Class C, and Class D notes on the closing date.

The GRF is amortising in line with the notes and is further split into a senior reserve (Target 1) and a junior reserve (Target 2). Target 1 offers liquidity support to the Class A and Class B notes and to Class A principal deficiency ledger (PDL). Target 2 offers interest and credit support to the Class A to Class D notes. Target 1 is sized at 0.5% of the Class A and Class B notes' outstanding balance, with a floor of 0.25% of the Class A and Class B notes' outstanding balance at closing, while Target 2 is sized at 1.0% of the Class A to Class D notes' outstanding balance less GRF Target 1, with a floor of 0.8% of the Class A and B notes' outstanding balance at closing less GRF Target 1. Replenishment of Target 2 follows payment of the Class D PDL. Once the Class A and Class B notes have been redeemed in full, Target 1 is set to zero and any excess amounts will be released to Target 2. Once the rated notes have been redeemed in full, Target 2 will be reduced to zero and any excess amounts will be part of the available principal funds.

Credit support is provided in the form of subordination of the notes and the GRF. Credit enhancement is 5.4% for the Class A notes, 3.3% for the Class B notes, and 1.75% for the Class C notes.

Following the first optional redemption date (FORD), falling in April 2030, the margin payable on the rated notes increases. This increase is subordinated in the revenue priority of payments and Morningstar DBRS' credit ratings do not address payment of the subordinated step-up margin.

Tulpenhuis 1 B.V. (the Seller) services and originates the mortgages with Tulp Hypotheken B.V. acting as subservicer. Tulp Hypotheken appointed Starter Nederland B.V. and Hypocasso B.V. as delegated subservicers for servicing and special servicing, respectively.

This transaction combines the Tulip Mortgage Funding 2019-1 (Tulp 2019) and Tulip Mortgage Funding 2020-1 (Tulp 2020) portfolios, both of which Morningstar DBRS rated. Having their first optional redemption date (FORD) in October 2024, the two transactions have been called and the loans are now securitised in TMF 2024-1.

Morningstar DBRS received information on a final mortgage portfolio as of 30 September 2024. The final portfolio consisted of 2,984 loans extended to 1,396 borrowers with an aggregate principal balance of EUR 455.5 million. The mortgage loans in the asset portfolio are all classified as owner-occupied and are secured by a first-ranking mortgage right. The final portfolio consists of 100% fixed-rate loans with resets. Furthermore, it contains 12.7% interest-only loans, and 86.9% of the loans were granted to employed borrowers. The entire portfolio consists of fixed-rate mortgage loans with different reset intervals ranging from five years to 30 years; most of the loan parts (63.0%) reset after 20 years, with the next most-common reset frequency at 30 years (28.5%). As of the cut-off date, all mortgage loans are performing.

The notes pay a floating interest rate indexed to three-month Euribor plus a margin. To mitigate the interest rate risk that arises because of this mismatch, the Issuer entered into a swap agreement with BNP Paribas SA (BNP Paribas; the swap counterparty). The swap counterparty pays the Issuer the swap notional amount, defined as the performing fixed-rate loans in the portfolio, multiplied by three-month Euribor. The Issuer pays the swap counterparty an amount equal to the swap notional amount multiplied by the swap rate plus the prepayment penalties. The current weighted-average portfolio swap rate is at 1.04%. Morningstar DBRS rates BNP Paribas with a Long-Term Critical Obligations Rating (COR) of AA (high) and Short-Term COR of R-1 (high) with Stable trends. The swap documents reflect Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

If the portfolio's constant prepayment rate falls outside the 3% to 15% range, the Issuer may have to make a subordinated payment on the swap as a NAMS rebalancing payment. This payment is deferrable and junior in the capital structure but senior to the turbo amortisation of the notes after the FORD.

Once the loan reaches the reset period, the borrowers will be offered a mortgage rate that takes into account the interest rate policy. The interest rate policy considers the swap rate at reset, the margin of the borrower, and additional credit risk spread based on the loan-to-value (LTV) ratio. The borrower's interest rate payable is floored at a minimum of 1.12% above the swap rate plus the LTV top-up.

The structure includes a PDL comprising four subledgers (Class A PDL to Class D PDL) that provision for realised losses as well as the use of any principal receipts applied to meet any shortfall in the payment of senior fees and interest on the senior-most class of notes outstanding. The losses will be allocated starting with the Class D PDL and then to subledgers of each class of notes in reverse-sequential order.

The Issuer account bank is ABN AMRO Bank N.V., rated with a Long-Term COR of AA with a Stable trend by Morningstar DBRS. Based on Morningstar DBRS' credit rating on the account bank, the downgrade provisions outlined in the transaction documents, and the structural mitigants, Morningstar DBRS considers the risk arising from exposure to the account bank to be consistent with the credit ratings assigned to the notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.
Morningstar DBRS' credit ratings on the Class A to Class C notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Interest Payment Amounts (related to the initial coupon) and the related Class Balances.

Morningstar DBRS' credit ratings on the Class A to Class C notes do not address the credit risk associated with the increased rate of interest applicable to the Class A to Class C notes if the Class A to Class C notes are not redeemed on the Optional Redemption Date (as defined in and) in accordance with the applicable transaction document(s).

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the subordinated step-up margin payable on the Class A to Class C notes after FORD.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August, 2024) https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker, considering the default rates at which the rated notes did not return all specified cash flows.

Notes:
All figures are in euros unless otherwise noted.

The principal methodologies applicable to the credit ratings are:
-- European RMBS Insight: Dutch Addendum (11 September, 2024) https://dbrs.morningstar.com/research/439269 and
-- European RMBS Insight Methodology (18 September, 2024) https://dbrs.morningstar.com/research/439573.

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

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

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include TwentyFour Asset Management, Tulp Hypotheken B.V. and Barclays Bank Ireland PLC. Morningstar DBRS was provided with a final loan-by-loan data tape as at 30 September 2024, as well as the following historical data:
-- Dynamic monthly prepayments, from September 2019 to June 2024
-- Dynamic delinquencies, from September 2019 to June 2024

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

Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

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

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

These credit ratings concern newly issued financial instrument. These are the first Morningstar DBRS credit ratings on this financial instrument. This is the first credit rating action since the Initial Credit Rating Date.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com.

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

-- In respect of the Class A notes, a Probability of Default Rate (PDR) of 11.0% and LGD of 25.8%, corresponding to the AAA (sf) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class B notes, a Probability of Default Rate (PDR) of 9.5% and LGD of 21.1%, corresponding to the AA (high) (sf) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.
-- In respect of the Class C notes, a Probability of Default Rate (PDR) of 4.6% and LGD of 15.5%, corresponding to the A (low) (sf) credit rating scenario, was stressed assuming a 25% and 50% increase in the PD and LGD.

Morningstar DBRS concludes the following impact on the Class A notes:
-- 25% increase of the PD, ceteris paribus, would not lead to a downgrade;
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 25% increase of the LGD, ceteris paribus, would not lead to a downgrade;
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (sf);

Morningstar DBRS concludes the following impact on the Class B notes:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (sf);
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf);

Morningstar DBRS concludes the following impact on the Class C notes:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (sf);

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Ronja Dahmen, Vice President,
Rating Committee Chair: Rehanna Sameja, Senior Vice President
Initial Rating Date: 17 September 2024

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 credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- European RMBS Insight Methodology (18 September, 2024),
https://dbrs.morningstar.com/research/439573
-- European RMBS Insight: Dutch Addendum (11 September, 2024) and European RMBS Insight model v.10.0.0.0., https://dbrs.morningstar.com/research/439269
-- Legal Criteria for European Structured Finance Transactions (28 June, 2024),
https://dbrs.morningstar.com/research/435165
-- Derivative Criteria for European Structured Finance Transactions (6 September, 2024),
https://dbrs.morningstar.com/research/439043
-- Interest Rate Stresses for European Structured Finance Transactions (24 September, 2024),
https://dbrs.morningstar.com/research/439913
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September, 2024), https://dbrs.morningstar.com/research/439571
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August, 2024),
https://dbrs.morningstar.com/research/437781

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

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.