Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Action:

Moody's confirms ratings in UK reverse mortgage transaction Equity Release Funding (No.3)

Global Credit Research - 17 Jan 2014

London, 17 January 2014 -- Moody's Investors Service today confirmed the ratings of the Class A2 and Class B notes in the UK reverse mortgage transaction Equity Release Funding (No.3) PLC. The primary driver for the confirmation is the updated long-term loss projections under stressed house price and repayment assumptions.

Issuer: EQUITY RELEASE FUNDING (NO.3) PLC

....GBP310M Class A2 Notes, Confirmed at Aaa(sf); previously on Oct 18, 2013 Aaa(sf) Placed Under Review for Possible Downgrade

....GBP42M Class B Notes, Confirmed at Aa3(sf); previously on Oct 18, 2013 Aa3(sf) Placed Under Review for Possible Downgrade

RATINGS RATIONALE

The confirmation of the Class A2 and Class B notes in Equity Release Funding (No.3) reflects decrease in long-term loss projections following an update of mortality data on the borrowers. The updated mortality data was not available to Moody's during the previous review in October 2013.

Using the updated mortality data allowed to quantify the increase of the share of mortgages that are due and will become due sooner. Weighted average loan to indexed valuation in the portfolio is 35.6% therefore loans that are due sooner are less likely to experience losses under stressed house prices assumptions. As of 20 October 2013 (which is the latest cut-off data available as of the date of the review) 2.1% of mortgages in the pool are already due because the borrower/borrowers have recently died. Furthermore 25.4% of mortgages are granted to borrowers who became single since the origination date. Moody's assumes that mortgages granted to single borrowers are likely to repay sooner than mortgages granted to joint borrowers.

In analyzing payments to noteholders in stressed house prices and repayment scenarios Moody's accounted for proceeds from negative equity insurance policy provided by Aviva Life & Pensions UK Limited (UKLAP) (A1). UKLAP insures the issuer against shortfalls should the amounts received from a sale of a property be insufficient to cover the outstanding amount of the mortgage. The insurance only covers cases of repayment due to the death or move into the long term care. Currently 38.0% of mortgages in the pool benefit from the negative equity insurance policy.

METHODOLOGICAL APPROACH

Moody's approach to monitoring transactions from the Equity Release Funding series is based on deal-specific cash flow modelling to determine the timeliness of payments and expected losses by legal final maturity of each class of notes. Moody's calculates the corresponding loss for each class of notes based on the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. The cash flow model contains scenarios for each rating level that correspond to a level of stress on house prices, mortality, morbidity and prepayment rates.

Moody's used mortality data by the UK Institute and Faculty of Actuaries to estimate the probability of death of the borrowers. In order to calculate the expected repayment profile of each loan Moody's stressed the mortality rates by applying improvement factors on each rating level. For example, Aaa (sf) improvement factor ranged from 12% to 8% depending on the age and gender of the borrower. In all investment grade scenarios, Moody's assumed that prepayment and morbidity rates drop by around 50% of the rates actually observed in the transaction. Moody's tested different house price inflation scenarios. For example, Aaa (sf) stress assumed a permanent drop of 35% during the first year of the deal. Finally, Moody's tested if each note's repayment schedule would be satisfied under combinations of different scenarios for mortality and house price inflation levels as a function of target ratings.

In monitoring transactions from the Equity Release Funding series, Moody's considered the overall level of stress to be sufficient if a note passes on house prices and mortality stresses up to three notches below the target note rating. For example, an Aa (sf) rated note would be sufficiently stressed at the combination of a A (sf) house prices inflation and a A (sf) mortality rates stress. Moody's assumed that the house price inflation is not directly correlated with mortality. Moody's used comparatively long performance histories available in the Equity Release Funding series to calibrate its monitoring approach. As such, Moody's analysis encompasses the assessment of stressed scenarios.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

Projected loss assumptions remain subject to uncertainty with regard to general economic activity, house prices, rates of mortality, morbidity and voluntary prepayments. Lower-than-expected mortality and morbidity rates and lower house prices would negatively affect the ratings. Deterioration in credit quality of Aviva plc may negatively affect the rating due to reliance on Aviva Life & Pensions UK Ltd as a negative equity insurance provider. Higher-than-expected mortality and morbidity rates and higher house prices could lead to upgrade of the Class B ratings.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

In rating this transaction, Moody's used a cash flow model to model cash flow stress scenarios to determine the extent to which investors would receive timely payments of interest and principal in the stress scenarios, given the transaction structure and collateral composition.

As the section on loss and cash flow analysis describes, Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Lyudmila Udot
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Christophe de Noaillat
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's confirms ratings in UK reverse mortgage transaction Equity Release Funding (No.3)
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

 


All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s Publications.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

 


NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody’s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

© 2014 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: