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Announcement:

Moody's confirms the ratings of four Dutch RMBS notes issued by STICHTING ELEVEN CITIES No. 3

21 Oct 2011

Approximately EUR 51 million of rated debt securities affected

London, 21 October 2011 -- Moody's Investors Service announced today that it has confirmed the ratings of classes B, C, D and E issued by STICHTING ELEVEN CITIES No. 3.

Complete rating action is as follows:

Issuer: STICHTING ELEVEN CITIES No. 3

....EUR18.6M B Notes, Confirmed at Aa2 (sf); previously on Dec 24, 2010 Aa2 (sf) Placed Under Review for Possible Upgrade

....EUR18.5M C Notes, Confirmed at A1 (sf); previously on Dec 24, 2010 A1 (sf) Placed Under Review for Possible Upgrade

....EUR8.4M D Notes, Confirmed at Baa1 (sf); previously on Dec 24, 2010 Baa1 (sf) Placed Under Review for Possible Upgrade

....EUR5.5M E Notes, Confirmed at Baa3 (sf); previously on Dec 24, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

The rating was placed on review for possible upgrade in December 2010 due to better-than-expected performance of the collateral backing the notes as well as credit enhancement build-up since closing.

RATINGS RATIONALE

Today's rating action concludes the review and takes into consideration (a) the level of arrears in the transaction, which, due to an administrative error, was previously understated in our system; (b) the overall performance of the collateral to date; (c) the levels of credit enhancement available to absorb the future projected losses on the loan portfolio; and (d) Moody's stable sector outlook for Dutch RMBS.

The lifetime losses (expected loss) and the Moody's Individual Loan Analysis (MILAN) Aaa Credit Enhancement (Milan Aaa CE) are the two key parameters used by Moody's to calibrate its loss distribution curve, which is used in the cash flow model to rate European RMBS transactions.

During the review we noted that certain loans in arrears classified in the investor report as "loans delivered to the Credit Risk Department" were inadvertently captured incorrectly in our system and were excluded from the arrears balances. At the time we placed the ratings on review for upgrade the correct 90 days arrears balance was equal to 1.36% of the current pool balance instead of 0.38% reported in our system. Therefore the transaction is not performing better than expected, contrary to what we previously believed.

Moody's notes that this administrative error has also occurred in STICHTING ELEVEN CITIES 4 and STICHTING ELEVEN CITIES 5. These two transactions are performing in line with expectations.

Portfolio Expected Loss:

Moody's has reassessed its lifetime loss expectation of STICHTING ELEVEN CITIES No. 3 taking into account the collateral performance to date as well as the current macroeconomic environment in the Netherlands. Moody's has adjusted its lifetime loss expectations to 0.5% of the original portfolio balance from 0.35% at closing. The updated expected loss assumption reflects the level of loans over 90 days in arrears including the loans delivered to the Credit Risk Department of 1.71% of the outstanding pool balance, as well as the low cumulative losses realised to date at 0.01% of the original pool balance.

MILAN Aaa CE:

As part of its analysis, Moody's has assessed updated loan-by-loan information on the collateral pool. As a result Moody's has maintained its MILAN Aaa CE assumption of 7.2%.

Moody's has confirmed the ratings on the notes notwithstanding the increase in the Expected Loss assumption, due to the credit enhancement build-up in the structure sufficient to absorb the future projected losses.

The primary source of assumption uncertainty is related to the current macroeconomic environment and in particular the Dutch housing market price development which will impact potential realisation of losses as the delinquent loans are worked out. Moody's expects house prices in the Netherlands to remain flat in the medium term due to tight housing supply.

We tested the sensitivity of the ratings to various stress scenarios. The ratings of the notes could withstand a simultaneous increase in the Expected Loss assumption to 0.7% of the original pool balance and an increase in MILAN Aaa CE to 8.5%.

TRANSACTION FEATURES

- STICHTING ELEVEN CITIES No. 3 closed in June 2007. Loans more than 60 days in arrears correspond to 1.9% of the current portfolio balance, while cumulative losses amount 0.01% of the original portfolio balance. The pool factor stands at 63.8%.

Set-off : Moody's also assessed the set-off risk on current accounts as well as the life insurance policy exposure using a conservative assumption on the distribution in terms of credit quality and exposure to counterparties of insurance companies.

For details on the deal structure, please refer to the STICHTING ELEVEN CITIES No. 3 new issue report available on www.moodys.com.

Please also refer to the "Dutch Prime and NHG RMBS Indices - June 2011", which is available on www.moodys.com in the Industry / Sector Research sub-directory under the Research & Ratings tab.

Moody's ratings address the expected loss posed to investors by the legal final maturity of the notes (May 2078). Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

The methodologies used in this rating were Moody's Approach to Rating RMBS in Europe, Middle East, and Africa, published in October 2009, Moody's Updated MILAN methodology for Rating Dutch RMBS published in October 2009, Cash Flow Analysis in EMEA RMBS: Testing Structural Features with the MARCO Model published in January 2006, and Revising Default/Loss Assumptions Over the Life of an ABS/RMBS Transaction published in December 2008. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Other Factors used in this rating are described in Global Structured Finance Operational Risk Guidelines: Moody's Approach to Analyzing Performance Disruption Risk published in June 2011.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Maria Divid
Associate 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

Barbara Rismondo
VP - Senior Credit Officer
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 the ratings of four Dutch RMBS notes issued by STICHTING ELEVEN CITIES No. 3
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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