The FINANCIAL — London/Madrid-01 August 2011: Fitch Ratings has affirmed three tranches of SOL-LION Fondo de Titulizacion de Activos, a Spanish RMBS securitisation of prime mortgage loans originated by ING Direct N.V. (not rated by Fitch, but a wholly owned subsidiary of ING Bank N.V., rated 'A+'/Stable/'F1+').
The rating actions are as follows:
Class A (ISIN ES0317104000) affirmed at 'AAAsf'; Outlook Stable
Class B (ISIN ES0317104018) affirmed at 'A-sf'; Outlook Stable
Class C (ISIN ES0317104026) affirmed at 'BBB-sf'; Outlook Stable
The affirmation was driven by the stable performance of the portfolio since the ratings were assigned in July 2010. As of May 2011, the proportion of the portfolio in arrears by more than three months stood at 17bps. Defaults, defined as loans in arrears by more than 18 months, have been limited to date (3bps of the original portfolio balance). Given the pipeline of reported late-stage arrears, Fitch believes that this will remain the case in the near future.
As with most other Spanish RMBS transactions, Fitch believes that the current low interest rate environment is positively affecting borrower affordability and that the volume of arrears could rise to higher levels in more stressful interest rate scenarios. However, the low loan-to-value ratios and predominantly prime characteristics of the underlying assets led Fitch to maintain Stable Outlooks on the rated tranches.
The underlying assets in the portfolio have a non-standard feature, whereby borrowers can fix their interest for a period of up to three years. However, the portion of fixed-rate loans in the pool has declined to 4.8% in May 2011 from 9.4% when Fitch rated the transaction. The mismatch between the fixed-rate interest earned on such loans and the floating-rate interest paid on the equivalent amount of the outstanding notes is hedged by a swap provided by ING Direct.