Approximately RUB 2,354.893 million of Debt Securities affected
London, 28 December 2012 -- Moody's has assigned definitive ratings to
notes issued by Closed Joint Stock Company "Mortgage Agent Europe
2012-1", Russian RMBS:
RUB 2,354.893M A Notes, Definitive Rating Assigned Baa3 (sf)
RUB 703.410M Class B Notes were not rated by Moody's.
This transaction is the first securitisation of mortgages originated by
Credit Europe Bank Ltd. (Ba3). The portfolio consists of the Russian
residential mortgage loans serviced by Credit Europe Bank. DeltaCredit
Bank (Baa3/P-3) will be acting as back-up servicer in the transaction.
Moody's assigned provisional ratings to these notes on 18 December 2012.
The rating takes into account the credit quality of the underlying
mortgage loan pool, from which Moody's determined the MILAN Credit
Enhancement and the portfolio expected loss, as well as the transaction
structure and legal considerations. The expected portfolio loss of 7.5%
and the MILAN required credit enhancement of 23% serve as input
parameters for Moody's cash flow model and tranching model, which is
based on a probabilistic lognormal distribution as described in the
report "The Lognormal Method Applied to ABS Analysis", published in July
The most significant driver for the MILAN Credit Enhancement number,
which is similar to other MILAN CE numbers in the Russian RMBS
transactions was the limited amount of historical information available
from the originator and the fact that for about 32% of the borrowers
income was verified using forms provided by the bank rather than official
tax forms. The main driver for the expected loss, which is also in line
with expected losses assumed for other Russian RMBS transactions, was
the limited historical data available on the originator's portfolio. The
weighted average current loan-to-value (LTV) of 56.5% based on minimum of
the estimated purchase price and valuation is slightly lower than the LTV
observed in other Russian RMBS transactions.
The transaction benefits from an amortising reserve fund fully funded at
closing at 5% of the initial Class A note balance. The reserve fund is
replenished before the interest payment on the unrated Class B notes.
Subject to conditions such as no draw on the reserve fund, no unpaid
principal deficiency on Class A, and no servicer default, the reserve
fund may amortise at 5% of the outstanding Class A note balance down to a
floor of 1% of initial Class A note balance.
The transaction also benefits from a non-amortising commingling reserve
fund, which is equal to 1% of initial Class A note balance and can be
used to compensate the issuer for any losses resulting from the failure
of the servicer to transfer the amounts collected from the borrowers.
Ratings address the expected loss posed to investors by the legal final
maturity of the notes. Moody's ratings only address the credit risk
associated with the transaction. Other non-credit risks have not been
addressed, but may have a significant effect on yield to investors.
The V Score for this transaction is High, which is in line with the score
assigned for the Russian RMBS sector. The High V-Score reflects
uncertainty associated with legal and regulatory environment in the
sector, limited experience of the originator in the securitisation
market, and limited performance data available for the book of the
originator. V-Scores are a relative assessment of the quality of
available credit information and of the degree of dependence on various
assumptions used in determining the rating. High variability in key
assumptions could expose a rating to more likelihood of rating changes.
The V-Score has been assigned accordingly to the report "V-Scores and
Parameter Sensitivities in the Major EMEA RMBS Sectors" published in
Moody's Parameter Sensitivities: Even if the portfolio expected loss was
increased from 7.5% to 15% and MILAN Credit Enhancement was increased
from 23% to 36.8%, the model output indicates that the Class A notes
would have achieved Baa3.
Moody's Parameter Sensitivities provide a quantitative/model-indicated
calculation of the number of rating notches that a Moody's structured
finance security may vary if certain input parameters used in the initial
rating process differed. The analysis assumes that the deal has not aged
and is not intended to measure how the rating of the security might
migrate over time, but rather how the initial rating of the security
might have differed if key rating input parameters were varied. Parameter
Sensitivities for the typical EMEA RMBS transaction are calculated by
stressing key variable inputs in Moody's primary rating model.
The principal methodology used in this rating was Moody's Approach to
Rating RMBS in Europe, Middle East, and Africa published in June 2012.
Please see the Credit Policy page on www.moodys.com for a copy of this
Other Factors used in this rating are described in Key Legal and
Structural Rating Issues in Russian Securitisation Transactions published
in June 2007.
In rating this transaction, Moody's used a cash flow model to model the
cash flows and determine the loss for each tranche. The cash flow model
evaluates all default scenarios that are then weighted considering the
probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, the corresponding loss for each
class of notes is calculated given the incoming cash flows from the
assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum product
of (i) the probability of occurrence of each default scenario; and (ii)
the loss derived from the cash flow model in each default scenario for
each tranche. Moody's also considered scenarios where the Mortgage Agent
has defaulted as a result of nonpayment of senior fees or interest on the
notes, asset-liability mismatch, or insufficient mortgage coverage. In
this case, Moody's assumed that the liquidation of assets occurred and
the notes were repaid according to the post-enforcement waterfall using
the proceeds of the asset liquidation assuming a recovery rate of 50%.
As such, Moody's analysis encompasses the assessment of stressed