DBRS Assigns Final Ratings to FTA, Santander Hipotecario 9

DBRS Ratings Limited (“DBRS”) has today assigned the following ratings to notes issued by Fondo De Titulización De Activos, Santander Hipotecario 9. (“SanHip 9”):

• ‘A’ (sf) to Class A
• B (sf) to Class B
• C (sf) to Class C

The transaction is a securitisation of first lien Spanish residential mortgage loans originated in the Kingdom of Spain by Banco Santander SA (Santander). Like previous transactions in the SanHip series this transactions has a higher than average Loan to Value (LTV). The original unindexed loan to value was 96.8% and the current un-indexed loan to value is 89.7%. In DBRS opinion loans with higher LTVs have a higher probability and as the borrower has lower equity in the event of default, loss severities are expected to be higher than lower LTV loans. The transaction has reasonable loan seasoning at approximately 50 months. This is partly of a consequence of approximately 50% of the asset pool being previously part of the SanHip 6 transaction. The pool also consists of approximately 9% of loans that are originated to members of Banco Santander’s staff. Such loans enjoy a discount to the standard rates applied by the bank. The discount elapses when employment with Banco Santander ceases. DBRS has applied additional penalties to such loams

Credit enhancement for the Class A note is calculated as 43% comprises the Class B notes and the reserve fund. Credit enhancement for the Class A notes is calculated as 18% and comprises the reserve fund. As reflected by the C (sf) rating the C notes do not have any ‘hard’ credit enhancement and will rely solely on excess spread as credit enhancement.

Santander is the loan servicer and also fulfills the roles of the collection account and treasury account provider. Santander meets the minimum rating requirements to fulfill these roles. The transaction does not have a swap. The majority of the assets (c.98%) are linked to 12 months Euribor, the liabilities are linked to 12 months Euribor. There is also a small portion of fixed rated loans, approximately 2%. Although it is typical that 12 months Euribor would be higher than 3 Months euribor there is risk that as the 12 months Euribor can only reset annually and 3 months Euribor can reset every three months, that in a rising interest rate environment that for this transaction the 3 months Euribor could be higher than 12 months Euribor. This would mean that the index on the liabilities would be higher than the index on the yielded on the assets. DBRS has modeled this feature in its cash flow modeling using its Unified Interest Rate Methodology.

The ratings are based upon DBRS review of the following analytical considerations:
• The transaction’s capital structure and the form and sufficiency of available credit enhancement. Relevant credit enhancement is in the form of subordination.
• The credit quality of the mortgages backing the notes and the ability of the servicer to perform collection activities on the collateral.
• The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.
• The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in Euro unless otherwise noted.

The principal methodologies applicable are:
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Legal Criteria for European Structured Finance Transactions
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations

These can be found on dbrs.com under Methodologies. For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”.

The sources of information used for this rating include investor reports and documents provided by the issuer. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality. The information upon which DBRS ratings and reports are based, and any other Content displayed on the Site, is obtained by DBRS from sources DBRS believes to be accurate and reliable. DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance. The extent of any factual investigation or independent verification depends on facts and circumstances.

The final ratings concern newly issues financial instruments.

This is the first DBRS rating on these financial instruments.

For additional information on this rating, please see the linking document located at

For further information on DBRS’s historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository see http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Alastair Bigley
Rating Committee Chair: Quincy Tang
Initial Rating Date: 25 June 2013