DBRS Confirms Ratings on Dutch RMBS Transactions Following Methodology Update

DBRS Ratings Limited (DBRS) has today confirmed its ratings on 37 classes of notes across eight Dutch residential mortgage-backed securities (RMBS) transactions as follows:

-- BEST 2010 B.V. Senior Class A Mortgage-Backed Floating Rate Notes confirmed at AAA (sf)
-- BEST 2010 B.V. Mezzanine Class B Mortgage-Backed Floating Rate Notes confirmed at AA (sf)
-- BEST 2010 B.V. Junior Class C Mortgage-Backed Floating Rate Notes confirmed at BBB (low) (sf)
-- Candide Financing 2007 NHG B.V. Class A Notes confirmed at AA (sf)
-- Delft 2017 B.V. Class A confirmed at AAA (sf)
-- Delft 2017 B.V. Class B confirmed at AA (sf)
-- Delft 2017 B.V. Class C confirmed at A (sf)
-- Delft 2017 B.V. Class D confirmed at BBB (sf)
-- Delft 2017 B.V. Class E confirmed at BB (low) (sf)
-- Dolphin Master Issuer B.V. Series 2010-1, Class A3 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2010-1, Class A4 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2012-2, Class A1 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2012-2, Class A5 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2012-2, Class A6 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2012-2, Class A7 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2012-2, Class B confirmed at AA (sf)
-- Dolphin Master Issuer B.V. Series 2012-2, Class C confirmed at A (sf)
-- Dolphin Master Issuer B.V. Series 2013-1, Class A2 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2013-2, Class A confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2014-1, Class A confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2014-2, Class A confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2014-3, Class A confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2015-1, Class A1 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2015-1, Class A2 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2015-1, Class A3 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2015-1, Class A4 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2015-3, Class A confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2016-1, Class A1 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2016-1, Class A2 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2016-1, Class A3 confirmed at AAA (sf)
-- Dolphin Master Issuer B.V. Series 2016-1, Class A4 confirmed at AAA (sf)
-- Essence IV B.V. Senior Class A Mortgage-Backed Fixed Rate Notes confirmed at AAA (sf)
-- Essence V B.V. Class A Notes confirmed at AAA (sf)
-- Essence VI B.V. Class A confirmed at AAA (sf)
-- Orange Lion VII RMBS B.V. Class A2 confirmed at AAA (sf)
-- Orange Lion VII RMBS B.V. Class A3 confirmed at AAA (sf)
-- Orange Lion VII RMBS B.V. Class A4 confirmed at AAA (sf)

The rating actions are the result of a full review of each transaction following publication of DBRS’s “European RMBS Insight: Dutch Addendum” (the Dutch Addendum or the Addendum) on 24 April 2017. The Addendum follows the publication of the “European RMBS Insight Methodology” (the Methodology) on 17 May 2016. The Methodology introduced a new proprietary default model (the European RMBS Insight Model or the Model) that forecasts the expected defaults and losses of portfolios of European residential mortgages. The Model combines a loan-scoring approach and dynamic delinquency migration matrices to calculate loan-level defaults and losses. The loan-scoring models and dynamic delinquency migration matrices are developed using jurisdictional-specific data on loans, borrowers and collateral types. In addition, the European RMBS Insight Model uses a home price model to generate market value decline rates (MVDs).

DBRS currently rates 53 tranches from nine Dutch RMBS transactions that are now analysed using the Methodology and introduction of the European RMBS Insight Model. However, DBRS has taken rating actions today on 37 classes of notes across eight Dutch transactions. Given that DBRS has received notification of the full redemption of some of the outstanding notes issued by Goldfish Master Issuer B.V., to take place on 30 May, a full review of the transaction and the related rating actions will follow by then.

The Dutch Addendum is the third jurisdictional addendum published for the Methodology. Analysis of Dutch residential mortgages per the Dutch Addendum includes indexation of the underlying property values of both frequency of default and severity of losses. The Dutch Addendum details the Dutch Mortgage Scoring Model (Dutch MSM), which was constructed using logistic regression with 29 parameters from 16 variables determined to assess the relative credit risk of the Dutch residential mortgages. The Dutch MSM was built with objective variables (loan and borrower characteristics) and judgemental variables (Dutch Underwriting Score and Deal Quality).

In addition, 12 risk segments were estimated based on scoring of the universe of eligible loans (per defined DBRS criteria) used to construct the Dutch MSM with a delinquency migration matrix estimated for each risk segment based on the observed roll rates. Rating scenario MVDs are determined for each of the 12 regions of the Netherlands (and the national level) using the house price data published by Statistics Netherlands.

Along with the material changes introduced by the Methodology, all the rating actions are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults.
-- The default, recovery and loss assumptions on the remaining collateral pool.
-- Current credit enhancement (CE) available to the notes to cover the expected losses at each tranche’s respective rating levels.

Each portfolio was analysed using the European RMBS Insight Model. Cash flow stresses were undertaken on each class of notes to test the ability of the transaction to pay principal and interest consistently with the terms and conditions of the notes and the assigned ratings, given the assumptions in terms of frequency of defaults and severity of losses in a given rating scenario.

Notes:
All figures are in euros unless otherwise noted.

The principal methodologies applicable to the ratings are European RMBS Insight Methodology, European RMBS Insight: Dutch Addendum and Master European Structured Finance Surveillance Methodology.

DBRS has applied the principal methodologies consistently and conducted a review of the transactions in accordance with the surveillance sections of the principal methodologies.

For those transactions that include a revolving period, an asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

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

Other methodologies referenced in these transactions 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 these ratings include the European DataWarehouse GmbH and the parties involved in the ratings, including but not limited to the originators, the issuers and their agents.

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

DBRS was not supplied with third-party assessments in the context of these reviews. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing these ratings to be of satisfactory quality.

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.

Please see the attached disclosure “DBRS Confirms Ratings on Dutch RMBS Transactions Following Methodology Update – Disclosures” for the following information related to each rating action:

-- Initial Rating Date
-- Last Rating Action Date
-- Lead Surveillance Analyst
-- Rating Committee Chair
-- Portfolio Default Rate (PDR) and Loss Given Default (LGD)
-- Risk Sensitivity Analysis

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

For further information on DBRS historic 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.

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor
London EC3M 3BY
United Kingdom
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
-- European RMBS Insight Methodology
-- European RMBS Insight: Dutch Addendum
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- 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.