(The following statement was released by the rating agency)
Oct 02 - OVERVIEW
-- We have performed a credit and cash flow analysis of Essence III, applying our Dutch RMBS criteria.
-- Based on our analysis, we have affirmed our rating on Essence III's class A notes. -- Essence III is a Dutch prime RMBS transaction that closed in September 2010.
Standard & Poor's Ratings Services today affirmed its 'AAA (sf)' credit rating on Essence III B.V.'s class A notes--the only notes that we rate in this transaction.
Today's rating action follows our credit and cash flow analysis of the most recent transaction information that we have received, as part of our surveillance review cycle. Our analysis reflects the application of our Dutch residential mortgage-backed securities (RMBS) criteria and our cash flow criteria (see "Dutch RMBS Market Overview And Criteria," published on Dec. 16, 2005, "Cash Flow Criteria For European RMBS Transactions," published on Nov. 20, 2003, and "Update To The Cash Flow Criteria For European RMBS Transactions," published on Jan. 6, 2009).
Essence III has a revolving structure until September 2017. During this period, it can use the principal proceeds from the underlying mortgage loans to purchase new loans. As a result, the credit quality of the pool may deteriorate. At closing, we stressed the pool data to a worst-case scenario, based on the substitution criteria.
Since closing, the portfolio's credit quality has deteriorated due to an increasing level of arrears in the underlying portfolio, and to declining house prices. However, the level of credit enhancement required to maintain our current ratings is still lower than the available credit enhancement. This is because at closing, we stressed the worst composition of the portfolio based on the revolving criteria. The current level of credit enhancement is still commensurate with our current 'AAA (sf)' rating on Essence III's class A notes. Therefore, we have affirmed our rating on this class of notes.
Our credit stability analysis indicates that the maximum projected deterioration that we would expect at each rating level, for time horizons of one year and three years, under moderate stress conditions, are in line with our credit stability criteria (see "Methodology: Credit Stability Criteria," published on May 3, 2010).
Essence III is a Dutch prime RMBS transaction that closed in September 2010. It is backed by mortgages that were originated by HypInvest B.V., Seyst Hypotheken B.V., Royal Residentie Hypotheken B.V., Muzen Hypotheken B.V., Nieuwegein Hypotheken B.V., Zwaluw Hypotheken B.V., Estate Hypotheken B.V., ATRIOS Hypotheekfonds B.V., Amstelstaete Hypotheken B.V., Quion I B.V., Quion III B.V., Quion 14 B.V., Quion 30 B.V., Nationale Hypotheek Maatschappij B.V., IKS Hypotheken B.V., Capitalum Hypotheken B.V., Huizen Hypotheken B.V., 1895 Hypotheken B.V, GMAC RFC Nederland B.V., and Zwitserleven. The transaction benefits from a fully funded, nonamortizing reserve fund.
RELATED CRITERIA AND RESEARCH -- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012
-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March 14, 2012
-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
-- Principles Of Credit Ratings, Feb. 16, 2011 -- Methodology: Credit Stability Criteria, May 3, 2010 -- Update To The Cash Flow Criteria For European RMBS Transactions, Jan. 6, 2009 -- European Legal Criteria For Structured Finance Transactions, Aug. 28, 2008 -- Dutch RMBS Market Overview And Criteria, Dec. 16, 2005 -- Cash Flow Criteria For European RMBS Transactions, Nov. 20, 2003