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Rating Action:

Moody's downgrades fifteen notes and confirms one note in six Dutch HERMES RMBS

03 Oct 2013

London, 03 October 2013 -- Moody's Investors Service has today downgraded fifteen mezzanine and junior classes of notes issued in five Dutch residential mortgage-backed securities (RMBS) transactions of the HERMES series. Also, Moody's has confirmed the rating of Class C in HOLLAND MORTGAGE BACKED SERIES (HERMES) VIII B.V. Today's downgrade actions were prompted by worse-than-expected collateral performance.

Today's rating action concludes the review for downgrade initiated by Moody's on 23 April 2013.

For a detailed list of affected ratings, see towards the end of the press release, before regulatory disclosures.

RATINGS RATIONALE

Today's downgrade actions take into consideration revision of key collateral assumptions due to the worse-than-expected performance and declining house prices in the Netherlands. Today's confirmation of the rating on Class C in HERMES VIII reflects sufficient credit enhancement to withstand the increase in key collateral assumptions and counterparty exposure.

The performance of the HERMES series has been deteriorating. 60+ day delinquencies have been trending above Moody's Dutch RMBS Performance Index levels by approximately 2% in each reviewed transaction with the exception of HERMES XV. Cumulative losses reached approximately 0.1% of the original portfolio balance in HERMES XV and between 0.5% and 0.75% of the original portfolio balance in the remaining reviewed transactions.

After considering the current amounts of realized losses and completing a delinquency roll rate analysis for the portfolio, Moody's increased its lifetime expected loss assumptions for HERMES VIII through XII to levels between 1.3% and 1.6% of the original portfolio balance. The lifetime expected loss assumption in HERMES XV remains unchanged at 0.75% of the original portfolio balance. A list of the transactions with the updated assumptions is available at the following link: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF343584.

MILAN Aaa CE

Moody's has re-assessed loan-by-loan information to determine the MILAN Aaa CE. As a result, Moody's has increased its MILAN Aaa CE assumption to 12% in HERMES VIII, 13% in HERMES IX through XII and 7.5% in HERMES XV. This increase is mainly driven by higher delinquency levels for a relatively smaller outstanding portfolio compared to closing as well as by declining house prices in the Netherlands.

- Exposure to Counterparty

Moody's rating analysis also took into consideration the set-off risk arising from exposure to SNS Bank N.V. as originator in the six transactions. This exposure is not driving today's downgrade actions. Each of the six transactions benefits from a commingling reserve which mitigates the risk of commingling arising from exposure to SNS Bank N.V. as collection account bank.

- SENSITIVITY ANALYSIS

Expected loss assumptions remain subject to uncertainties such as the future general economic activity, interest rates and house prices. If realised recovery rates were to be lower or default rates were to be higher than assumed, the rating would be negatively affected.

OTHER DEVELOPMENTS MAY NEGATIVELY AFFECT THE NOTES

Moody's describes additional factors that may affect the ratings in "Approach to Assessing Linkage to Swap Counterparties in Structured Finance Cashflow Transactions" published on 18 July 2013.

The principal methodology used in these ratings was Moody's Approach to Rating RMBS Using the MILAN Framework published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

In reviewing these transactions, Moody's used its cash flow model, ABSROM, to 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, Moody's calculates the corresponding loss for each class of notes given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss for each tranche is the sum product of (1) the probability of occurrence of each default scenario and (2) the loss derived from the cash flow model in each default scenario for each tranche.

As such, Moody's analysis encompasses the assessment of stressed scenarios.

LIST OF AFFECTED RATINGS

Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) VIII B.V.

....EUR20.5M C Notes, Confirmed at Baa2 (sf); previously on Apr 23, 2013 Baa2 (sf) Placed Under Review for Possible Downgrade

Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) IX B.V.

....EUR37.5M C Notes, Downgraded to A3 (sf); previously on Apr 23, 2013 A1 (sf) Placed Under Review for Possible Downgrade

....EUR15M D Notes, Downgraded to Ba2 (sf); previously on Apr 23, 2013 A2 (sf) Placed Under Review for Possible Downgrade

....EUR28.5M E Notes, Downgraded to Ba3 (sf); previously on Apr 23, 2013 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) X B.V.

....EUR31.5M C Notes, Downgraded to A3 (sf); previously on Apr 23, 2013 A2 (sf) Placed Under Review for Possible Downgrade

....EUR9M D Notes, Downgraded to Ba1 (sf); previously on Apr 23, 2013 A3 (sf) Placed Under Review for Possible Downgrade

....EUR27.7M E Notes, Downgraded to Ba3 (sf); previously on Apr 23, 2013 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) XI B.V.

....EUR31.5M C Notes, Downgraded to Baa1 (sf); previously on Apr 23, 2013 A2 (sf) Placed Under Review for Possible Downgrade

....EUR9M D Notes, Downgraded to Ba1 (sf); previously on Apr 23, 2013 A3 (sf) Placed Under Review for Possible Downgrade

....EUR27.7M E Notes, Downgraded to Ba3 (sf); previously on Apr 23, 2013 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) XII B.V.

....EUR44M B Notes, Downgraded to Aa2 (sf); previously on Oct 26, 2006 Definitive Rating Assigned Aa1 (sf)

....EUR31.9M C Notes, Downgraded to A2 (sf); previously on Oct 26, 2006 Definitive Rating Assigned Aa3 (sf)

....EUR28.6M D Notes, Downgraded to Baa3 (sf); previously on Apr 23, 2013 A2 (sf) Placed Under Review for Possible Downgrade

....EUR40.7M E Notes, Downgraded to Ba3 (sf); previously on Apr 23, 2013 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: HOLLAND MORTGAGE BACKED SERIES (HERMES) XV B.V.

....EUR38.65M D Notes, Downgraded to Baa1 (sf); previously on Apr 23, 2013 A2 (sf) Placed Under Review for Possible Downgrade

....EUR26.1M E Notes, Downgraded to B2 (sf); previously on Apr 23, 2013 Ba2 (sf) Placed Under Review for Possible Downgrade

REGULATORY DISCLOSURES

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 these transactions in the past six months.

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.

Maria Divid
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
Associate Managing Director
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 downgrades fifteen notes and confirms one note in six Dutch HERMES RMBS
No Related Data.
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