(The following statement was released by the rating agency)
Oct 01 - OVERVIEW
-- On April 20, 2012, we placed on CreditWatch negative our rating on Haus-1998-1's class B-2 notes, as a result of deteriorating credit support.
-- We have conducted a full review of the transaction and we believe that the rated classes of notes face increasing credit risk as the transaction amortizes.
-- Therefore, we have lowered to 'B- (sf)' from 'BBB (sf)' and removed from CreditWatch negative our rating on the class B-2 notes. We have also lowered our rating on the class B-1 notes to 'BBB (sf)' from 'A+ (sf)'.
-- Haus-1998-1 is a true-sale German RMBS transaction.
Standard & Poor's Ratings Services has today taken various credit rating actions in Haus-1998-1 Ltd.
Specifically, we have:
-- Lowered to 'B- (sf)' from 'BBB (sf)' and removed from CreditWatch negative our rating on the class B-2 notes, and
-- Lowered to 'BBB (sf)' from 'A+ (sf)' our rating on the class B-1 notes (see list below).
Today's rating actions follow our full review of the transaction, and reflect our view that the credit risk to the rated classes of notes has increased significantly as the transaction has amortized (tail-end risk).
Today's downgrade resolves our April 20, 2012 CreditWatch negative placement of the class B-2 notes, which resulted from decreasing credit support to this class of notes and from what we consider to be low recovery rates (see "Various Rating Actions In German RMBS Transaction Haus-1998-1 Following Credit Analysis And Deutsche Bank Affirmation").
The class A-1 notes fully amortized in August 2012, whereupon we withdrew our 'A+ (sf)' rating on this class of notes. As of today, the most senior outstanding class of notes is the class B-1 notes.
According to the latest investor report, received for the Sept. 14, 2012 payment date, the class B-2 notes' subordination has declined further to 13.5%, from 13.8% at our April 20, 2012 review. Consequently, while the transaction amortizes pro rata, the class B-3 notes have also diminished through losses constantly applied since June 2012. Since our last review in April 2012, recovery rates remained at what we consider to be low levels. At the same time, terminated loans and loans in foreclosure remain at about 14.5% of the current outstanding balance, which we consider to be high. In our opinion, 90-plus days delinquencies have been very low since our last review, today amounting to 0.05%.
Considering realized losses, terminated loans, loans in foreclosure, and delinquencies to date--and taking into account historical recovery rates in this particular portfolio--we have assessed the likelihood of future losses for both the performing and nonperforming parts of the collateral pool.
While about 85% of the pool is performing, we have observed interest shortfalls on the first-loss piece--the unrated class B-3 notes--on several occasions, and especially in 2012. We believe that a main driver of interest shortfalls is the relatively high amounts of fixed fees in the "miscellaneous fees" bucket.
The transaction continues to amortize and, due to the circumstances described above, we believe that tail-end risk to the rated classes of notes is increasing significantly.
Therefore, we have today lowered to 'B- (sf)' from 'BBB (sf)' and removed from CreditWatch negative our rating on the class B-2 notes.
We also lowered to 'BBB (sf)' from 'A+ (sf)' our rating on the class B-1 notes. We will continue to monitor the transaction's performance closely.
Haus-1998-1 is a true-sale German residential mortgage-backed securities (RMBS) transaction. The pool factor has reduced to 2.9%, from 3.3% at our April 20, 2012 review.
RELATED CRITERIA AND RESEARCH -- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012 -- Principles Of Credit Ratings, Feb. 16, 2011 -- Global Methodology For Rating Interest-Only Securities, April 15, 2010
-- Update To The criteria For Rating German Residential Mortgage-Backed Securities, Jan. 6, 2009
-- Criteria for Rating German Residential Mortgage-Backed Securities, Aug. 31, 2001
-- Economic Research: The Eurozone's New Recession, Sept. 25, 2012
-- Why Germany's Rising House Prices Are Bucking The European Trend, April 23, 2012
-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March 14, 2012
-- Deutsche Bank And Core Subsidiaries 'A+' Long-Term Credit Rating Affirmed After Action On Germany; Outlook Negative, Jan. 25, 2012
-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
RATINGS LIST Class Rating To From Haus-1998-1 Ltd. EUR718.15 Million Mortgage-Backed Floating-Rate Notes Rating Lowered And Removed From CreditWatch Negative B-2 B- (sf) BBB (sf)/Watch Neg Rating Lowered B-1 BBB (sf) A+ (sf) ((Bangalore Ratings Team, Hotline: +91 80 4135 5898, Bhanu.firstname.lastname@example.org, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Bhanu.Priya.email@example.com))