DBRS Confirms Orange Lion VII RMBS B.V.

DBRS Ratings Limited (DBRS) has today confirmed its AAA (sf) ratings on the Class A2, A3 and A4 (together, Class A) notes issued by Orange Lion VII RMBS B.V. (Orange VII).

Today’s rating actions follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies, defaults and losses.
-- Probability of default (PD) rate, loss given default (LGD) rate and expected loss assumptions for the remaining collateral pool.
-- The credit enhancement (CE) available to the Class A notes to cover the expected losses at the AAA (sf) rating level.

Orange VII closed in June 2012 and is a securitisation of prime Dutch residential mortgages originated by ING Bank N.V. (ING). Further advances to the borrowers are allowed and approximately 27.8% of the loans benefit from an NHG Guarantee.

PORTFOLIO PERFORMANCE
As of October 2016, the loans more than 90 days delinquent as a percentage of the outstanding portfolio collateral balance have declined to 0.5% from 1.1%. Cumulative losses during the same period have increased to 0.5% from 0.3%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis and updated the PD and LGD assumptions on the remaining pool. The PD assumption at the AAA (sf) rating level is reduced to 27.3% from 28.3% as a result of the improvement in the collateral performance. For the LGD assumption, DBRS in this review removed the haircut on the NHG Guarantee payout ratio applied at the higher rating stress level for the portion of the pool with NHG Guarantee. Consequently, the LGD assumption is reduced and, at the AAA (sf) rating level, the LGD assumption is reduced to 45.7% from 58.1%.

CREDIT ENHANCEMENT
The CE available to the Class A notes has increased to 21.5% from 20.0% at the last review as the transaction continues to repay. The source of CE is provided through the subordination of the Junior Class B notes net of balance on the Principal Deficiency Ledger, EUR 44.6 million as of the November 2016 payment date.

ING acts as the Account Bank and the Swap Counterparty for the transaction. ING’s reference rating of AA (low), being one notch below ING’s DBRS Long Term Critical Obligations Rating of AA, meets the Minimum Institution Rating criteria, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology, and meets the minimum required rating as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the AAA (sf) ratings assigned to the Class A notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is “Master European Structured Finance Surveillance Methodology.”

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release.

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of data and information used for this rating include the quarterly investor report from ING and quarterly loan-by-loan data from European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 14 September 2016, when DBRS discontinued the rating on the Class A1 notes following the full redemption of the notes.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- The Base Case PD and LGD assumptions for the remaining collateral pool are 4.48% and 30.76%, respectively. At the AAA (sf) rating level, the corresponding PD is 27.26% and the LGD is 45.72%.

-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increases by 50%, the rating on the Class A2 notes would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A2 notes would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating on the Class A2 notes would be expected to be at AA (sf).

Class A2 notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Class A3 notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Class A4 notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 14 June 2012

DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- Derivative Criteria for European Structured Finance Transactions

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.