Johannesburg, 31 May 2017 — Global Credit Ratings has published its updated Residential Mortgage Backed Securities (“RMBS”) Rating Criteria (the “Criteria”).
GCR has updated its RMBS Rating Criteria. The Criteria applies to transactions that benefit from a portfolio of diversified mortgage loan obligors. The Criteria only applies to mortgage loans. The Criteria provides an overview of how RMBS transactions are analysed. This covers, amongst others, an analysis of expected defaults, delinquencies, recoveries and prepayments; supplemented by a cash flow analysis.
As transactions can vary significantly and each transaction is unique, in certain cases analysis may diverge from stated assumptions. For example, assumptions may vary between countries, or between product types i.e. for affordable housing loans etc. If the criteria assumptions are amended or supplemented, these will be disclosed in individual transaction reports. Whilst country specific assumptions for South Africa are included within this report, individual country assumptions will be published as necessary. The Criteria applies globally, although every individual country and specific transaction may give cause to additional observations or deviations, which will be disclosed in the transaction specific reports.
The Criteria is an update to the version published in May 2016. There are no significant amendments to the criteria. For the readers ease of reference, the foreclosure costs have been amended to be assumed at 5.5% of gross property sale proceeds, with a minimum of R30 000. The Stress Adjustments have also been included for restructured mortgages and a portfolio that is in excess of the GDP per province. In addition, vintage origination buckets have been amended.
The update of this Criteria will not have an impact on any existing transactions that have been rated under it. Going forward, all new transactions will be rated using this updated Criteria.
This criteria should be read in conjunction with GCR’s published ‘Global Structured Finance Rating Criteria, – updated February 2017’.
The updated Criteria is available at www.globalratings.net.
Sector Head: Structured Finance Ratings
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Sector Head: Insurance Ratings
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RATING LIMITATIONS AND DISCLAIMERS
ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: http://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: http://GLOBALRATINGS.NET/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT http://GLOBALRATINGS.NET.
|Cash Flow||A financial term for monetary changes in operations, investing and financing activities.|
|Default||A default occurs when: 1.) The Borrower is unable to repay its debt obligations in full; 2.) A credit-loss event such as charge-off, specific provision or distressed restructuring involving the forgiveness or postponement of obligations; 3.) The borrower is past due more than X days on any debt obligations as defined in the transaction documents; 4.) The obligor has filed for bankruptcy or similar protection from creditors.|
|Foreclosure||Legal proceedings initiated by a creditor to repossess the collateral for obligations that have defaulted.|
|International Scale Rating LC||International local currency (International LC) ratings measure the likelihood of repayment in the currency of the jurisdiction in which the issuer is domiciled. Therefore, the rating does not take into account the possibility that it will not be able to convert local currency into foreign currency or make transfers between sovereign jurisdictions.|
|Loan||A sum of money borrowed by a debtor that is expected to be paid back with interest to the creditor. A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.|
|Long-Term Rating||A long term rating reflects an issuer’s ability to meet its financial obligations over the following three to five year period, including interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.|
|Mortgage Loan||A debt instrument where immovable property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to repay the loan. Registration is a prerequisite for the existence of any mortgage loan. A mortgage can be registered over either a corporeal or incorporeal property, even if it does not belong to the mortgagee. Also called a Mortgage bond.|
|Obligor||The party indebted or the person making repayments for its borrowings.|
|Origination||A process of creating assets.|
|Prepayment||Early or excess repayment of an obligation. Partial or full prepayment of the outstanding loan amount.|
|Proceeds||Funds from issuance of debt securities or sale of assets.|
|Property||Movable or immovable asset.|
|Short-Term Rating||A short term rating is an opinion of an issuer’s ability to meet all financial obligations over the upcoming 12 month period, including interest payments and debt redemptions.|
|Structured Finance||A method of raising funds in the capital markets. A Structured Finance transaction is established to accomplish certain funding objectives whist reducing risk.|
|Transaction||A transaction that enables an Issuer to issue debt securities in the capital markets. A debt issuance programme that allows an Issuer the continued and flexible issuance of several types of securities in accordance with the programme terms and conditions.|