(The following statement was released by the rating agency)
March 14 - Fitch Ratings has affirmed Securitized Guaranteed Mortgage Loans II’s class A notes, as follows:
Class A (NL0006477739): affirmed at ‘AAAsf’; Outlook Stable; off Rating Watch Negative (RWN)
The transaction comprises 100% NHG-backed mortgages loans originated by Achmea Hypotheekbank N.V. (AHB). Following the update to Fitch’s criteria for rating RMBS transactions backed by the Nationale Hypotheek Garantie (NHG), AHB restructured the transaction on 13 March 2012. The affirmation reflects the increased credit enhancement provided by the increase of the reserve fund in the transaction.
The agency was provided with updated pool cuts, historical NHG claims submitted to the Stichting Waarborgfond Eigen Woningen (WEW, administrator of the NHG) by AHB, historical foreclosure data of the NHG-backed loans and set-off risk assessments, followed by proposals to restructure the SGML transaction and amended documentation.
On the restructure date, the non-amortising reserve fund for SGML II was increased to 6.5% of the note balance outstanding at the restructure date with a target level of 7.5%. The seller provided a subordinated loan to fund this increase. The increase from the new initial to the target level will be funded by trapping excess spread in the reserve fund.
The transaction features a revolving period; until the payment date falling in October 2013 principal repayments may be used to purchase substitute mortgages originated by the seller. The allowed percentage of employee loans in the portfolio has been reduced to 2% from the original 10%. Both the interest-only and seller employee loan substitution triggers have been changed to a fixed amount threshold to allow for natural amortisation of the portfolio. In its asset analysis, the agency simulated a migration towards pool characteristic limits as included in the documentation.
In line with its general cash flow modelling criteria, Fitch has reduced the postponement of the back-loaded default timing curve as the transaction is highly seasoned (6.3 years at end-December 2011).
Fitch has not given credit to the notification trigger, as the trigger was changed to below the ‘A’ level (at ‘BBB-'). However, credit was given to the collection foundation structure in place at AHB. In Fitch’s view, this structure mitigates the commingling risks and hence the agency did not size for these risks in the transactions.
To analyse the CE levels, Fitch evaluated the collateral using its default model, details of which can be found in the reports entitled “EMEA Residential Mortgage Loss Criteria”, dated 16 August 2011, “EMEA RMBS Criteria Addendum - Netherlands” and “EMEA RMBS Criteria Addendum - Netherlands - NHG-Backed”, both dated 6 July 2011, available at www.fitchratings.com. The agency assessed the transaction cash flows using default and loss severity assumptions indicated by the default model under various structural stresses including prepayment speeds and interest rate scenarios. The cash flow tests showed that each class of notes could withstand loan losses at a level corresponding to the related stress scenario without incurring any principal loss or interest shortfall and can retire principal by the legal final maturity.
Fitch’s stress and rating sensitivity analysis is detailed in an update report which will shortly be available at www.fitchratings.com.