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RPT-Fitch affirms AyT Hipotecario Mixto II, FTA
August 27, 2013 / 12:12 PM / 4 years ago

RPT-Fitch affirms AyT Hipotecario Mixto II, FTA

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Aug 27 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed AyT Hipotecario Mixto II as follows:

Class PH1 (ISIN ES0370151005): affirmed at ‘AA-sf’; Outlook Negative

Class PH2 (ISIN ES0370151013): affirmed at ‘BBBsf’; Outlook Negative

Class CH1 (ISIN ES0370151021): affirmed at ‘AA-sf’; Outlook Negative

Class CH2 (ISIN ES0370151039): affirmed at ‘BBB+sf’; Outlook Negative

This Spanish RMBS transaction includes two segregated portfolios of prime residential mortgages, which are not cross-collateralised: the participations (Participaciones or PH) and certificates (Certificados de Transmision de Hipoteca or CTH). The PH pool comprises loans originated and serviced by Banco Mare Nostrum (BB+/RWN/B), CaixaBank (BBB/Negative/F2), Kutxabank (BBB/Negative/F3) and Bankia (BBB/RWN/F2/RWN). The CH portfolio loans are originated and serviced by the above banks except for Kutxabank.


Arrears Performance Within Expectations

The affirmations reflect the good performance of the underlying assets in both series. As of the most recent interest payment date in June 2013, three-month plus arrears stood at 0.68% and 2.3% of the current pool balance for the PH and CH series, respectively, while cumulative gross defaults were at 0.26% and 0.21% of the initial asset balance for the PH and CH series, respectively. The higher portion of borrowers in arrears over three-month within the CH series is a result of the relative lower credit quality versus the PH pool with the weighted average original loan-to-value of 83.6% compared with 61.3% for the PH portfolio.

Robust Excess Spread Levels

The transaction’s structure allows for the full provisioning of defaulted loans (defined as loans in arrears by more than 18 months). At present, healthy levels of gross annualised excess spread, standing at 0.9 and 1% per annum of the outstanding collateral balance for the PH and CH series, respectively, have been sufficient to fully provision for defaulted loans and to ensure that the reserve funds remain fully funded.

Tail Risk

We believe the transaction may be exposed to increasing performance volatility as its portfolio size has decreased to 29.9% and 25.2% of the initial balance for the PH and CH series, respectively. As such, we conducted additional scenario testing to simulate adverse credit trends at the tail end of the life of the transaction. The affirmations capture our opinion that available and projected credit enhancement is sufficient to withstand volatility at the notes’ respective rating levels.

Payment Interruption Risk

We have assessed the credit implications of a potential default of any of the collateral servicers. We consider this risk is sufficiently mitigated by the diversification of counterparty risk as four (in the PH series) and three (in the CH series) unrelated servicers are involved, the fact that reserve funds remain fully funded, and the daily sweep of collateral collections into the SPV bank account.


Deterioration in asset performance, especially in the CH series given its portfolio’s lower credit quality, may result from either economic factors, in particular the increasing effect of unemployment in the short term, or interest rate increases in the medium or long term as all the assets are floating rate loans.

Moreover, further decline in house prices in excess of Fitch’s standard assumptions could influence downwards the recovery rate expectation, which could lead to downgrades of the notes.

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