November 14, 2012 / 3:52 PM / 5 years ago

TEXT-Fitch publishes covered bond mortgage liquidity, refinance stress addendum

Link to Fitch Ratings' Report: Covered Bonds Rating Criteria - Mortgage
Liquidity & Refinance Stress AddendumNov 14 - Fitch Ratings has published a Mortgage Liquidity & Refinance Stress
addendum for its covered bonds criteria. The addendum details Fitch's
assumptions on liquidity gap risks in mortgage covered bond programmes. It also
details the agency's refinancing cost assumptions and price caps used to
calculate expected sale proceeds on mortgage cover assets.

Fitch's refinance cost assumptions has been updated for each country, reflecting
the agency's view of the stressed cost of refinancing mortgage assets, following
an issuer default. No changes have been made to the agency's price cap
assumptions.

The criteria assumptions are published as an addendum to the Covered Bonds
Rating Criteria and should be read in conjunction with this report.

Over the next six weeks, Fitch will review the impact of the updated refinance
cost assumptions on each of the mortgage covered bond programmes it rates.
Refinance cost assumptions are factored into the modelling of maturity
mismatches between the cover pool and outstanding covered bonds. The agency does
not expect the revised refinance cost assumptions to result in rating changes,
although overcollateralisation for a given rating may increase or decrease
depending on the relevant pool composition and the extent of maturity
mismatches.

Fitch publicly rates 105 mortgage covered bond programmes, issued out of 20
countries.

The report is available on www.fitchratings.com or by clicking on the link
above.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:
Covered Bonds Rating Criteria - Amended

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