DBRS Confirms Class A2 Notes Rating on Record Lion NV/SA-Compartment RMBS I

DBRS Ratings Limited (DBRS) has today confirmed the rating on the Class A2 Notes issued by Record Lion NV/SA-Compartment RMBS I (Record Lion RMBS I or the Issuer) at AAA (sf).

The confirmation of the rating on the Class A2 Notes follows an annual review of the transaction and is based on the following analytical considerations as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of the February 2017 payment date.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement (CE) for the Class A2 Notes to cover the expected losses at the AAA (sf) rating level.

Record Lion RMBS I closed in November 2011 and is a securitisation of first-ranking Belgium residential mortgages originated and serviced by Record Bank SA/NV, owned by ING Belgium SA/NV (ING). The structure envisaged a revolving period that terminated in November 2014.

PORTFOLIO PERFORMANCE
As of February 2017, the loans that were more than 90 days delinquent as a percentage of the outstanding portfolio collateral balance have increased to 1.13%, from 0.99%, as of the last annual review. Cumulative losses as a percentage of the original portfolio balance during the same period have increased slightly to 0.23%, from 0.14%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated the PD and LGD assumptions on the remaining collateral pool. At the AAA (sf) rating level, the PD and LGD assumptions are 26.98% and 49.66%, respectively.

CREDIT ENHANCEMENT
The CE available to the Class A2 Notes has increased over the year as a result of the principal amortisation on the Class A2 Notes. CE to the Class A2 Notes is provided by subordination of the Class B Notes and a non-amortising Reserve Fund (RF). As of the February 2017 payment date, the CE available to the Class A2 Notes increased to 44.43%, up from 36.92% as of last annual review. The RF is available to cover any shortfalls in payment of senior fees and interest of the Class A2 Notes as well as absorbing any losses debited to the Class A Notes principal deficiency ledger. The RF is currently at the initial and target level of EUR 80.7 million.

The transaction benefits from a Liquidity Facility provided by ING andused to cover any shortfalls in the payments to senior fees and interest due on the Class A2 Notes. The Liquidity Facility is sized at 1.75% of the Principal Outstanding of the Notes. As of February 2017, the amount of this Liquidity Facility was at EUR 36.1 million.

ING is the Account Bank of the transaction. The DBRS private rating on the Account Bank complies with the Minimum Institution Rating given the rating assigned to the Class A2 Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

ING is also the Swap Counterparty of the transaction. The DBRS private rating of ING is above the First Rating Threshold for a Swap Counterparty, as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: Master European Structured Finance Surveillance Methodology.

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

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

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

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of data and information used for this rating include investor and cash flow reports provided by ING and loan by loan data from the European DataWarehouse GmbH.

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

At the time of the initial rating DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

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

The last rating action on this transaction took place on 8 April 2016, when DBRS confirmed the ratings on the Class A1 and Class A2 Notes at AAA (sf). Class A1 Notes were discontinued on 19 December 2016, following full repayment.

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

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):

-- The base case PD and LGD of the current pool of mortgages for the Issuer are 3.57% and 22.38%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.98% and the LGD is 49.66%.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf).

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“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: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 17 November 2011

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Unified Interest Rate Model for European Securitisations
-- Derivative Criteria for European Structured Finance Transactions

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