DBRS Takes Rating Actions on CFHL-2 2015

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the notes issued by CFHL-2 2015:

-- Class A1 confirmed at AAA (sf)
-- Class A2-A confirmed at AAA (sf)
-- Class B upgraded to AA (high) (sf) from AA (sf)
-- Class C upgraded to AA (low) (sf) from A (sf)
-- Class D upgraded to A (sf) from BBB (sf)
-- Class E upgraded to BBB (low) (sf) from BB (sf)

Today’s rating actions follow an annual review of the transaction and are based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults.
-- Portfolio default (PD) rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current credit enhancement (CE) available to the rated notes to cover the expected losses at their respective rating levels.

CFHL-2 2015 closed in August 2015 and is a securitisation of French home loans originated and serviced by Crédit Foncier de France SA (Crédit Foncier). The home loans are fully drawn fixed-rate loans for home purchase or construction financing. The construction projects were completed before their loans were sold to the transaction. In addition, as of 31 May 2017, 28.64% of the outstanding loans were guaranteed by Crédit Logement, SA (rated AA (low) by DBRS).

PORTFOLIO PERFORMANCE AND ASSSUMPTIONS
The asset portfolio is performing within DBRS’s expectations. As of 31 May 2017, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance were at 1.01%, and loans more than 30 days delinquent were at 3.04%. The outstanding default ratio was 0.42%. DBRS has maintained the base case PD and LGD assumptions for the remaining collateral pool at 3.53% and 16.84%, respectively.

CREDIT ENHANCEMENT
The CE available to all the rated notes has increased as the transaction deleverages. The sources of CE to each class of notes are the overcollateralisation, the subordinated notes and the General Reserve Fund. The overcollateralisation is building up through the payments of Turbo Amortisation Amount to the junior notes and is currently in the amount of EUR 16.4 million. The General Reserve Fund is currently at its non-amortising target amount of EUR 6.8 million. As of the 28 June 2017 payment date, the CEs available to Class A1, A2-A, B, C, D and E were 27.43%, 27.43%, 16.39%, 11.40%, 7.26% and 3.61%, respectively.

Crédit Foncier is the Account Bank and the Swap Counterparty to the transaction. Its current DBRS private rating meets the Minimum Institution Rating criteria, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology, and meets the swap counterparty first rating threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the ratings assigned to the Class A1 and A2-A notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings 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 these ratings include the investor reports provided by EuroTitrisation and the loan-by-loan data from European Data Warehouse 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 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 these ratings 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 5 August 2016, when DBRS confirmed the ratings on all the rated notes.

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”):

-- DBRS expected a base case PD and LGD for the remaining collateral pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD assumptions for the remaining collateral pool are 3.53% and 16.84%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.91% and the LGD is 43.02%. At the AA (high) (sf) rating level, the corresponding PD is 23.40% and the LGD is 35.81%. At the AA (low) (sf) rating level, the corresponding PD is 18.06% and the LGD is 31.13%. At the A (sf) rating level, the corresponding PD is 15.45% and the LGD is 28.97%. At the BBB (low) (sf) rating level, the corresponding PD is 9.56% and the LGD is 22.88%.
-- 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 on Class A1 would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on Class A1 would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on Class A1 would be expected to be at AAA (sf).

Class A1 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)

Class A2-A 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 AA (high) (sf)

Class B Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)

Class C Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

Class D Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

Class E Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD, expected rating of BBB (low) (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (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 and US regulations only.

Lead Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 16 June 2015

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
-- Unified Interest Rate Model for European Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- 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