(The following statement was released by the rating agency)
Oct 12 () - Fitch Ratings has affirmed Belgian Lion N.V./S.A., a prime RMBS transaction originated and serviced by ING Belgium N.V/S.A. (ING Belgium), as follows:
Class A (ISIN BE0002383553) affirmed at 'AAAsf'; Outlook Stable
The affirmation reflects the stable asset performance in the past year. As of August 2012, the volume of loans in arrears by three months or more stood at 34bps of the current outstanding balance compared to 24bps a year ago.
The issuer amended the transaction documentation in February 2011 to include a EUR141m cash reserve, funded by a subordinated loan granted by ING Belgium. This reserve fund can be used to cover any shortfalls in the senior costs and class A interest payments and principal deficiency ledger (PDL) and resulted in credit enhancement for the senior notes increasing to 12.30% from 9.65% at closing. In addition, the revolving period was shortened by 12 months to end in February 2013 instead of February 2014.
To date, only six loans have been liquidated, resulting in cumulative losses of EUR79,524 and a cumulative loss severity of approximately 11%. These losses are booked and remain outstanding on the non-rated class B PDL. In Fitch's opinion, these losses are unlikely to be cleared, given that the class B PDL now ranks junior to the subordinated loan principal and interests repayments in the waterfall.
The volume of denounced loans as of August 2012 stood at 52bps of the initial pool balance. Based on the information received from ING Belgium's total mortgage book, it takes on average 19 months to bring borrowers from the first arrears to litigation and 15 months from litigation to selling the property. Around 70% borrowers in arrears were also reported to have cured after 24 months following their entry into a workout period.
As the transaction is currently in its revolving period, note amortisation has not begun, so class A credit enhancement remains unchanged at 12.3% since February 2011. Fitch's analysis used the post-revolving pro-forma pool characteristics, and at present, the class A credit enhancement is deemed commensurate with that of a 'AAAsf' rating.
Additional information is available on
. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Sources of information: In addition to those mentioned in the applicable criteria, the sources of information used to assess these ratings were Investor Reports and Loan Tapes.
Applicable criteria, 'EMEA Residential Mortgage Loss Criteria' dated 7 June 2012, and 'EMEA Residential Mortgage Loss Criteria Addendum - Belgium' dated 27 July 2012 'Counterparty Criteria for Structured Finance Transactions' and 'Counterparty Criteria for Structured Finance Transactions: Derivative Addendum', dated 30 May 2012, 'Global Structured Finance Rating Criteria', dated 6 June 2012 are available at
. Applicable Criteria and Related Research: EMEA Residential Mortgage Loss Criteria EMEA Criteria Addendum - Belgium - Mortgage and Cashflow Assumptions Counterparty Criteria for Structured Finance Transactions Counterparty Criteria for Structured Finance Transactions: Derivative Addendum Global Structured Finance Rating Criteria (New York Ratings Team)