GREEN STORM 2017 B.V.

Transcription

1 Presale: GREEN STORM 2017 B.V. This presale report is based on information as of May 15, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings Assigned Class A B Prelim. rating* AAA (sf) AA+ (sf) Prelim. tranche percentage (%) Available credit enhancement (%) Interest Three-month EURIBOR plus a margin Three-month EURIBOR plus a margin C AA (sf) Three-month EURIBOR plus a margin D BBB+ (sf) Three-month EURIBOR plus a margin E NR 1.02 N/A Three-month EURIBOR plus a margin Step-up interest Three-month EURIBOR plus a margin Three-month EURIBOR plus a margin Three-month EURIBOR plus a margin Three-month EURIBOR plus a margin Three-month EURIBOR plus a margin Optional call date April 2022 April 2022 April 2022 April 2022 N/A Legal final maturity April 2064 April 2064 April 2064 April 2064 April 2064 *Our rating on each class of notes is preliminary as of the May 15, 2017, and subject to change at any time. We expect to assign final credit ratings on the closing date, subject to a satisfactory review of the transaction documents and legal opinion. Our ratings address timely interest and ultimate principal. Available credit enhancement for the class A notes will consist of subordination and a cash reserve. The class E notes' issuance proceeds will fund the cash reserve at closing. NR--Not rated. EURIBOR--Euro Interbank Offered Rate. N/A--Not applicable. Primary Credit Analyst: Vedant Thakur, London (44) ; vedant.thakur@spglobal.com Secondary Contact: Nicola Dobson, London (44) ; nicola.dobson@spglobal.com See complete contact list on last page(s) MAY 15,

2 Transaction Participants Originator Obvion N.V. Arranger Rabobank Seller Obvion N.V. Mortgage administrator/servicer Obvion N.V. Subservicer Stater Nederland B.V. Security trustee Stichting Security Trustee GREEN STORM 2017 Issuer administrator Intertrust Administrative Services B.V. Cash advance facility provider Rabobank Swap counterparty Obvion N.V. Back-up swap counterparty Rabobank Issuer bank account provider Rabobank Commingling guarantor Rabobank Construction deposits guarantor Rabobank Rabobank--Cooperatieve Rabobank U.A. Supporting Ratings Institution/role Cooperatieve Rabobank U.A. (Rabobank) as swap guarantor, issuer bank account provider, cash advance facility provider, commingling guarantor, and construction deposits guarantor. Rating A+/Stable/A-1 Transaction Key Features* Expected closing date May 2017 Collateral Outstanding net principal of the portfolio Country of origination A pool of first-ranking performing mortgage loans (or first- and consecutive-ranking mortgage loans) secured on Dutch residential properties 413,966, ( 400,732, net of savings loans) The Netherlands Concentration Noord-Brabant (17.13%), Noord Holland (14.21%), and Zuid Holland (15.31%) Property occupancy 100% owner-occupied Weighted-average original loan-to-market-value ratio (%) Weighted-average indexed current loan-to-market-value ratio (%) Average net loan size balance ( ) 229,778 Part loan size range to 930, Weighted-average seasoning (months) Weighted-average asset life remaining (years) Construction loans (%) 2.59 NHG loans benefit (%)** Self-employed (%) Weighted-average mortgage interest rate (%) 3.56 Arrears (%) 0.00 Redemption profile Annuity (26.47%), interest only (52.06%), and life (3.49%) Cash reserve Liquidity facility size % of the notes at closing, rising to 1.30% through excess spread 2.00% of the notes' outstanding balance (with a 1.45% floor of the closing notes' balance) MAY 15,

3 Transaction Key Features* (cont.) Mortgage priority First-ranking or first and sequentially-lower-ranking Maximum current loan-to-value ratio (%) Principal deficiency ledger Loss based Amount of jumbo valuation (%) Revolving period Until April 2022 *According to our calculations and based on the preliminary portfolio on the pool cut-off date of April 1, Based on the preliminary portfolio. Based on the net balance. Total borrower exposure. **National Hypotheek Garantie %, including information flagged as "other". Transaction Summary S&P Global Ratings has assigned preliminary credit ratings to GREEN STORM 2017 B.V.'s residential mortgage-backed floating-rate class A, B, C, and D notes. At closing, GREEN STORM 2017 will also issue unrated class E notes. GREEN STORM 2017 is Obvion N.V.'s 37th securitization of Dutch mortgage loans in the STORM series. The transaction's mechanisms are similar to its predecessor, GREEN STORM 2016 B.V. However, GREEN STORM 2017 features a revolving period and before the first optional redemption date, it may acquire new loans, replacement loans, and the further advances that the originator may make to borrowers. The transaction securitizes a pool of performing loans secured on first- and consecutive-ranking Dutch mortgages, which Obvion originated and services. GREEN STORM 2017 will only securitize assets that comply with the "green" eligibility criteria in Obvion's book. These criteria relate to the residential properties having certain energy performance certificates. In our view, and based on historical information that we have received on these types of loans, we expect GREEN STORM 2017 to perform in line with other STORM transactions. Our preliminary ratings reflect our assessment of the transaction's payment structure, cash flow mechanics, and the results of our cash flow analysis to assess whether the notes would be repaid under stress test scenarios. The transaction's structure relies on a combination of subordination, excess spread, a cash advance facility, and a reserve fund to cover credit losses and income shortfalls. Additionally, it benefits from payments from Waarborgfonds Eigen Woningen (WEW) under the National Hypotheek Garantie (NHG) guarantee scheme to reduce foreclosure losses for certain loans. Taking these factors into account, we consider the credit enhancement available to the rated notes to be commensurate with the preliminary ratings that we have assigned. Notable Features GREEN STORM 2017's structure is similar to previous GREEN STORM transaction. However, it features a revolving period and before the first optional redemption date, it may acquire new loans, replacement loans, and the further advances that the originator may make to borrowers. The available credit enhancement for the class A notes in GREEN STORM 2017 is about 2.5% higher than in GREEN STORM Like its predecessors in the STORM series, the transaction's pool includes construction loans, which introduce credit MAY 15,

4 and setoff risk in the transaction because the seller could fail to meet draw-down requests. The revolving pool can include no more than 9% construction loans. The construction deposits related to these construction loans remain with the seller until the respective borrower makes a request. Cooperatieve Rabobank U.A. (Rabobank) provides a guarantee for these construction deposits. The transaction benefits from WEW's payments under the NHG guarantee scheme, which reduces the risk of foreclosure losses, if NHG's eligibility criteria are met. Of the pool, the scheme covers 27.68% of the loan parts. However, we only gave benefit to 27.63%, which applies to the full balance of all the loan parts. This has a positive effect on our weighted-average loss severity (WALS) calculation. The pool also has 7.89% of NHG mortgages originated after January For these mortgages, the first 10% will be deducted from any loss-payout. The payment made by WEW is therefore smaller than in NHG mortgages originated before January We have also conducted our analysis without considering any potential payments under the NHG guarantee. Under this scenario, the class A notes can achieve a preliminary 'AAA (sf)' rating. Strengths, Concerns, And Mitigating Factors Strengths All of the mortgage loans in the portfolio are performing first- and sequentially lower-ranking residential mortgages, in our view. Of the pool, 27.68% benefits from the NHG guarantee, which applies to the full balance of all the loan parts. This has a positive effect on our WALS calculation. The proceeds of the class E notes of 1.02% of the class A to D notes at closing will fund the cash reserve, and may build up to 1.30% of the portfolio through excess spread. This reserve cannot amortize during the transaction's life. An external amortizing cash advance facility (equal to 2.00% of the notes' outstanding balance), with a floor of 1.45% (of the closing notes' balance), will provide liquidity support for the transaction. The notes will pay down sequentially, so credit enhancement can build up over time for the outstanding notes enabling the structure to withstand performance shocks. The seller is not a deposit-taking institution, which means that the transaction is not exposed to setoff risk through the depositors. Although arrears increased in 2013 and the beginning of 2014 in a number of STORM transactions, the performance of Obvion-originated mortgages has historically been strong and has shown a decrease in arrears in past two years. We have reflected this in our originator adjustment. More recently, arrears in STORM transactions have stabilized. Concerns and mitigating factors Under the transaction documents, before the first optional redemption date, GREEN STORM 2017 may acquire new loans, replacement loans, and the further advances that the originator may make to borrowers. In addition, loans that breach the representations and warranties may be replaced, which could impair the portfolio's credit quality. We have factored the additional purchase criteria into our credit analysis. We have analyzed the potential deterioration in the credit quality because of the revolving nature of the pool. In our opinion, the transaction structure and the additional purchase criteria mitigate to a large extent the risk of deterioration in the portfolio's credit quality. The portfolio's weighted-average original loan-to value (OLTV) is higher than our archetypical loan-to-value (LTV) ratio. In our opinion, the available credit enhancement mitigates this risk. Dutch LTV ratios are generally higher than those from other European jurisdictions. Historically, Dutch mortgage MAY 15,

5 borrowers have benefitted from various incentives under the tax regime, indicating that high LTV ratios do not necessarily reflect higher risk in the Dutch mortgage market. In our opinion, the available credit enhancement mitigates this risk. As in many other Dutch residential mortgage-backed securities (RMBS) transactions, if a mortgage borrower's insurance policy provider becomes insolvent, borrowers may be able to set off any loss resulting from their insurance policy repayments against their mortgage loans. In this transaction, there are 17 insurance groups with a 'life' redemption profile, with the largest exposure equating to 0.55% of the portfolio. We consider the transaction's minimal exposure to any single insurer to be materially insignificant to our ratings in this transaction. Of the pool, 2.59% comprises construction loans, which introduce credit in the transaction because the seller could fail to meet draw-down requests. In our opinion, the construction loans have higher risk during the construction phase because these borrowers have a higher propensity to default, and the property's value is lower. We differentiate the type of construction loans depending on the amount of the construction deposit. For loans with a construction deposit up to 10% of the loan balance (2.37% of the pool), we apply an adjustment factor of 1.2x to the foreclosure frequency. For loans with a construction deposit greater than 10% of the loan balance (0.22% of the pool), we apply an adjustment factor of 1.5x to the foreclosure frequency and a multiple of 1.15x to the market-value-decline assumptions. In our opinion, the available credit enhancement mitigates these risks. Furthermore, if the seller were to become insolvent and fails to pay the deposit on the construction loan to the borrower, the borrower may be able to set off the amount of the undrawn deposit against the amount owed to the issuer under the mortgage loan. In this transaction, the issuer benefits from a construction deposit guarantee from Rabobank, under which the issuer would be able to draw an amount equal to the aggregate outstanding construction deposits, if the seller were to become insolvent. In our view, this mechanism mitigates setoff risk in the transaction. None of the loans in the pool are in arrears. Outstanding STORM transactions have recently shown more stability compared with This could be attributed to signs of recovery in the Dutch economy, as house prices increased and unemployment came down from its peak. However, we have projected arrears of 0.6% in GREEN STORM 2017 given the historical performance of Obvion's mortgage book and the revolving nature of the pool. Borrower payments are first credited into the seller's account before being transferred on a monthly basis to the issuer's account. This means that funds may become commingled with the seller's other funds. If the seller becomes insolvent, some collections may become commingled in its insolvency estate. As the seller is an unrated entity, Rabobank will provide a commingling guarantee, which we believe mitigates commingling risk. Under the transaction documents, in order to be considered eligible to support the 'AAA (sf)' rating on the class A notes, the long-term rating on the commingling and construction deposit guarantee provider (in this case, Rabobank) should be at least 'A', or 'A+' if the short-term rating is lower than 'A-1'. The transaction documents make additional provisions if the long-term rating on Rabobank falls below the minimum required rating (see "Cash collection arrangements and transaction account"). Transaction Structure At closing, GREEN STORM 2017 will use the class A to D notes' issuance proceeds to purchase and accept the assignment of all the seller's rights against the borrowers in the transaction's mortgage portfolio (see chart 1). The class E notes' issuance proceeds will fund the cash reserve. GREEN STORM 2017 will pay interest quarterly in arrears on the payment date on the 22nd of January, April, July, and October of each year, beginning on July 22, The notes pay interest at three-month Euro Interbank Offered MAY 15,

6 Rate (EURIBOR) plus a margin. All of the classes of notes have a legal final maturity date in April Obvion is the originator and seller of the assets. Since 2012, it has been a wholly owned subsidiary of Rabobank. Obvion has been an established originator and servicer in the Netherlands since It distributes mortgage loans through the independent intermediary channel. Its underwriting criteria are largely determined by the Code of Conduct (introduced in January 2007 by the Dutch Association of Banks; it is updated from time to time) and the NHG guarantee criteria for the NHG loans. According to the servicing agreement, Obvion will manage the portfolio's daily administration and servicing, including the collection of payments and the undertaking of enforcement actions in accordance with its internal policy. Obvion has appointed Stater Nederland as its subservicer to carry out part of the servicing activities. In our most recent visit in July 2015, we reviewed Obvion's origination, underwriting, valuation, collection, and default management procedures as an integral part of the ratings process. There have been no major changes since then and MAY 15,

7 we are of the opinion that they are compatible with our preliminary ratings on the notes. The performance of Obvion-originated mortgages has historically been strong and we have reflected this in our originator adjustment. NHG Guarantee Of the loans in the pool, 27.68% of the full balance of all the loan parts benefits from a NHG guarantee, which we factored into our analysis. This guarantee covers certain losses realized after the foreclosure of a property, including the outstanding principal amount owed to the lender, unpaid accrued interest, repossession costs, and other miscellaneous costs. Irrespective of the scheduled repayments or unscheduled prepayments made on the underlying mortgage loan, the NHG guarantee amortizes monthly by an amount equal to the monthly principal payments that would be made if the mortgage loan was being repaid annually over a term of 30 years. The maximum amount that could be claimed under the guarantee could be less than the outstanding amount of the loan at the time of default. As of Jan. 1, 2014, NHG loans are subject to new conditions under the NHG scheme. The collateral pool comprises 7.89% of NHG mortgages originated after January We have considered the reduced payout ratio in our credit analysis. The Stichting Waarborgfonds Eigen Woningen ("Homeownership Guarantee Fund") was created in 1993 as an independent entity under the supervision of the Ministry of Housing, Spatial Planning, and the Environment (VROM) and the Association of Netherlands Municipalities (VNG). In 1995, the national mortgage guarantee program, the NHG, was introduced. WEW is responsible for the policy and implementation of the NHG. WEW can refuse to pay some or all of a claim if the eligibility criteria for the guarantee are not met. This eligibility is checked only at the time of the claim, not at the loan origination date. We have received historical pay-out data on the percentage of claimed amounts that WEW has reimbursed to Obvion. We have examined the reasons for nonpayment at an individual-claim level, and consequently determined a "success rate". In the case of Obvion we have observed a relatively high historical pay-out rate. We apply our success rate at different rating levels according to our criteria (see "Methodology For Assessing Mortgage Insurance And Similar Guarantees And Supports In Structured And Public Sector Finance And Covered Bonds," published on Dec. 7, 2014). We have also conducted our analysis without considering any potential payments under the NHG guarantee. Under this scenario, the class A notes can achieve a preliminary 'AAA (sf)' rating. Construction Loans For construction loans, the borrowers deposit part of the agreed mortgage loans with the seller. These deposits are typically for the mortgaged properties' construction or renovation. The seller pays the deposit to the borrowers in stages as the construction or renovation works progress. If the seller becomes insolvent and fails to pay the deposit to the borrower, the borrower may be able to set off the amount of the undrawn deposit against the amount owed to the issuer under the mortgage loan. In this transaction, the issuer benefits from a construction deposit guarantee from Rabobank, under which the issuer would be able to draw an amount equal to the aggregate outstanding construction deposits, if the seller becomes insolvent. Furthermore, construction loans carry a credit risk because these types of borrowers have a higher propensity to default during the construction phase. Under our European residential loans MAY 15,

8 criteria, we differentiate the type of construction loans depending on the amount of the construction deposit (see "Methodology And Assumptions: Assessing Pools Of European Residential Loans," published on the Dec. 23, 2016). For loans with a construction deposit up to 10% of the loan balance (2.37% of the pool), we apply an adjustment factor of 1.2x to the foreclosure frequency. For loans with a construction deposit greater than 10% of the loan balance (0.22% of the pool), we apply an adjustment factor of 1.5x to the foreclosure frequency and a multiple of 1.15x to the market-value-decline assumptions. Note Terms And Conditions Security for the notes The noteholders will benefit from the security granted in favor of the security trustee, Stichting Security Trustee GREEN STORM Three pledges from GREEN STORM 2017 to the security trustee will indirectly secure the notes: The first includes all rights to the portfolio's mortgage loans. The second includes all rights to the mortgage receivables purchase agreement, the interest-rate swap agreement, the conditional deed of novation, the servicing agreement, the issuer account agreement, the cash advance facility agreement, the sub-participation agreements, the beneficiary waiver agreement, the commingling guarantee, and the construction deposits guarantee. The third includes the issuer's claims on the issuer accounts (the issuer transaction account, the reserve account, the construction deposit account, the swap collateral account, and the cash advance facility stand-by drawing account). To pledge these security rights under Dutch law, GREEN STORM 2017 will pay to the security trustee (by way of parallel debt) an amount equal to the aggregate of all its undertakings, liabilities, and obligations to the security beneficiaries under the relevant transaction documents. Optional redemption/mandatory redemption GREEN STORM 2017 will use principal collections to redeem the class A to D notes. The class E notes will be redeemed using excess spread. Class E note principal is subordinated to the replenishment of the cash reserve. If GREEN STORM 2017 fully redeems the class A to D notes, any amounts in the cash reserve would be used in the interest priority of payments and would be available to redeem the class E notes. GREEN STORM 2017 can redeem the class A to D notes in full on the first optional redemption date in April 2022, or quarterly thereafter, at their principal amounts outstanding plus accrued interest. If there is a principal shortfall, the issuer can redeem the class B to D notes at the principal amounts outstanding, less the principal shortfall. Before the first optional redemption date, the issuer will use available principal receipts to purchase further advances and replacement receivables into the portfolio. Amounts in excess of these requirements will be applied in the principal priority of payments. Clean-up call The issuer can fully redeem the notes if the seller exercises the clean-up call on each payment date on which the mortgage's balance is lower than 10% of the mortgage loan's balance at closing. MAY 15,

9 Redemption for tax reasons If certain tax changes affect the notes, the issuer can redeem all of the notes as long as it has sufficient funds to discharge all amounts payable under the notes and items ranking either senior or pari passu. Final redemption Unless previously redeemed, all of the notes will redeem at their outstanding principal amount on the payment date in April Collateral Description The preliminary collateral portfolio consists of performing loans secured by first-ranking (or first- and consecutive-ranking) mortgages over residential properties in the Netherlands. The mortgage loans are of various product types: interest-only, bank savings, savings, annuity, life, investment, linear, switch, and combinations of these (see chart 2). Chart 2 MAY 15,

10 Chart 3 The preliminary portfolio has an outstanding principal balance of 413,966, ( 400,732, net of savings amounts), which comprises 1,744 loans (comprising 3,820 mortgage parts) as of April 1, MAY 15,

11 Chart 4 MAY 15,

12 Chart 5 MAY 15,

13 Chart 6 MAY 15,

14 Chart 7 The portfolio's 87.84% weighted-average original LTV ratio exceeds the average for a typical Dutch RMBS transaction. We calculated this by applying our European residential loans criteria. We consider that borrowers with minimal equity in their property are less likely to be able to refinance, and are more likely to default on their obligations, than borrowers with loans that have lower original LTV ratios. The largest geographic concentrations are Noord-Brabant (17.13%), Noord Holland (14.21%), and Zuid Holland (15.21%). The proportion of the portfolio with jumbo valuations is 17.93%. Our criteria classify a loan as a jumbo valuation if the valuation exceeds 500,000. As of April 1, 2017, the weighted-average seasoning of the assets was months. The average outstanding loan balance is 229,778 and the maximum balance is 930,000. Credit Structure A combination of subordination, the cash reserve, and excess spread on the mortgages provide credit enhancement to the notes. MAY 15,

15 Table 1 Portfolio WAFF And WALS With Credit To The NHG Guarantee Rating level WAFF (%) WALS (%) Expected loss (%) AAA AA A BBB BB B WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity. Mortgage loan interest rates Each of the mortgage loans pays either a floating or a fixed rate of interest, subject to a reset. The weighted-average interest rate on the portfolio is 3.56%. Interest rates vary between individual mortgage loans. At the reset date, a borrower may prepay the loan without penalty. Cash collection arrangements and transaction account Borrowers payments are made into the seller's accounts and can become commingled with other seller's funds. The collections will be transferred monthly to the issuer's collection account. The transaction is therefore exposed to commingling risk. At closing, Rabobank will provide a guarantee to mitigate commingling risk. We understand that the transaction documents' provisions will ensure that, if the long-term rating on the guarantor falls below 'A' (or 'A+', if the short-term rating falls below 'A-1'), the guarantor will deposit the available amount under the guarantee in the issuer's accounts. Issuer accounts At closing, the issuer will open its collection, reserve, and cash advance facility accounts with Rabobank, which will hold all of the transaction's funds. It is our understanding that appropriate downgrade language will be in place to ensure that if the long-term rating on the issuer bank account provider falls below 'A' (or 'A+', if the short-term rating falls below 'A-1'): A suitably rated guarantor would replace it; A suitably rated entity would provide the relevant bank accounts instead; or Any other alternative arrangement would be made to maintain the then-current ratings on the notes. Cash reserve At closing, GREEN STORM 2017 will fund the cash reserve using the class E notes' proceeds. The transaction documents allow the cash reserve to increase to 1.3% of the total outstanding class A to D notes' balance if excess spread is available. This target percentage does not amortize. The balance of this reserve account is available on any interest payment date to pay senior fees, expenses, and interest, and to reduce any debit balances on the respective principal deficiency ledgers (PDLs). If GREEN STORM 2017 uses the cash reserve, it is replenished up to the required amount from available excess spread, in accordance with the priority of payments. MAY 15,

16 Cash advance facility At closing, GREEN STORM 2017 will enter into a cash advance facility agreement with Rabobank, which will provide a facility equal to 2.00% of the total outstanding principal balance on the class A to E notes, subject to a floor of 1.45% of the initial note balance. The cash advance facility will be available to meet senior fees and expenses, and interest due on the notes if there remains a note shortfall after the reserve account has been used. The cash advance facility will not be available to pay the class B to D noteholders if there is a debit balance on the PDL as of the immediately preceding quarterly payment date (and for the class E notes, where a debit on the class D PDL exists). The transaction documents covering the cash advance facility are in line with our current counterparty criteria. Priority of payments On each payment date, GREEN STORM 2017 will apply all interest funds to make payments in accordance with the following simplified waterfall: Senior fees, expenses to several parties, cash advance facility commitment fee and servicing fees; Amounts owed to the cash advance facility provider; Amounts owed to the swap counterparty (other than the swap counterparty's default payment); The class A notes' interest; The class A notes' PDL; The class B notes' interest; The class B notes' PDL; The class C notes' interest; The class C notes' PDL; The class D notes' interest; Class D notes' PDL; Class E notes' interest; The cash reserve's replenishment up to the target amount; The class E notes' principal payments; and Other subordinated amounts. The PDL mechanism allows the use of excess spread to cure principal losses due to foreclosure, setoff, or sale. All amounts in the PDL will divert to principal funds. The PDL will comprise four sub-ledgers, i.e., one each for the class A, B, C, and D notes. The issuer will first debit deficiencies to the class D notes' PDL, then in reverse sequential order, ending with the class A notes' PDL as long as their debit balance is lower than the outstanding principal of each of the class D, C, B, and A notes, respectively. Principal priority of payments and mandatory redemption of the notes The issuer will apply available principal funds on each payment date according to the following simplified principal waterfall: The purchase price of additional receivables and further advances, until the first optional redemption date; The class A notes' principal payments, until fully repaid; The class B notes' principal payments, until fully repaid; The class C notes' principal payments, until fully repaid; and The class D notes' principal payments, until fully repaid. MAY 15,

17 Hedging Risk Interest swap agreement At closing, GREEN STORM 2017 will enter into a swap agreement with Obvion to hedge the basis risk between the rate of interest the issuer receives on the mortgage loans and the interest-rate that it pays on the notes. Under the swap, GREEN STORM 2017 will pay to the swap counterparty the scheduled interest due on the mortgages and the transaction account, plus received prepayment penalties, less senior fees and expenses the issuer owes, less excess spread of 0.50% per year of the principal amount outstanding of each class of notes (other than the class E notes). In turn, Obvion will pay to GREEN STORM 2017 the interest due on the swap notional. The swap notional is the class A to E notes' balance, minus realized losses not cured by excess spread. The class E notes' notional amount would be zero if a debit exists on the class D notes' PDL. We do not rate Obvion, but Rabobank is the swap guarantor. Under the transaction documents, if Obvion fails to deliver on its obligations when due to GREEN STORM 2017, the swap agreement will be novated to Rabobank. The documentation covering the swap agreement is in line with our current counterparty criteria. Credit Analysis We stressed the transaction's cash flow to test the credit and liquidity support provided by the assets, subordinated tranches, cash reserve, and any external sources (such as a cash advance facility). We implemented these stresses in our cash flow analysis at all relevant rating levels. Amount of defaults and recoveries For each loan in the portfolio, we estimated the likelihood that the borrower will default on its mortgage payments (the foreclosure frequency), and the amount of loss upon the subsequent sale of the property (the loss severity, expressed as a percentage of the outstanding loan). We assume the total mortgage balance to default. We determine the total amount of this defaulted balance that is not recovered for the entire portfolio by calculating our weighted-average foreclosure frequency (WAFF) and WALS. Our WAFF and WALS estimates increase in tandem with the respective rating levels, because the higher the rating on the notes, the higher the level of mortgage default and loss severity they should be capable of withstanding. We based our credit analysis on the loans' characteristics and the associated borrowers. We have applied market-specific criteria in our assessment of the WAFF and the WALS for this portfolio. Default patterns and timings The WAFF at each rating level specifies the total balance of the mortgage loans modeled to default over the transaction's life. We model these defaults to occur over a three-year recession. Furthermore, we test the effect of this recession's timing on the issuer's ability to repay the liabilities, by starting the recessionary period at closing, and at the end of the third year. MAY 15,

18 We applied the WAFF to the outstanding principal balance at closing. We model defaults to occur periodically in amounts calculated as a percentage of the WAFF. The timing of defaults follows two paths, referred to here as "front-loaded" and "back-loaded (see table 2). Table 2 Default Timings For Fast And Slow Default Curves Recession periods (months) Front-loaded defaults (percentage of WAFF applied in each month; %) Back-loaded default (percentage of WAFF applied in each month; %) WAFF--Weighted-average foreclosure frequency. Recovery timing Under our European residential loans criteria, we apply a recovery period of 18 months for owner-occupied mortgages and 24 months for NHG loans. As a result, on a weighted-average basis, we have assumed that the issuer regains any recoveries 20 months after a payment default. We have assumed 18 months of recovery in the scenario without considering any potential payments under the NHG guarantee. We always base the WALS that we use in a cash flow model on principal loss, including costs. We assumed no recovery of any interest accrued on the mortgage loans during the foreclosure period. After we apply the WAFF to the balance of the mortgages, the asset balance is likely to be lower than that of the liabilities (a notable exception is when a transaction relies on overcollateralization). Other structural mechanisms in the transaction address the interest reduction created by the defaulted mortgages during the foreclosure period. Delinquencies To model the liquidity stress that results from short-term delinquencies, the criteria include a hypothetical delay of a proportion of scheduled interest and principal receipts equal to one-third of the WAFF. Modeling applies this delay in each month of the first 18 months of a hypothetical recession and sets full recovery of the arrears to take place 36 months after the delinquency occurs. The cash flow stress for delinquencies is independent of the arrears adjustment to the WAFF. Interest and prepayment rates Our European residential loans criteria apply a wide range of different interest rate curves, and our modeling uses five different interest rate paths: up, down, up/down, down/up, and forward. These curves vary by stress scenario. We model two prepayment scenarios at all rating levels-high and forecast. For this transaction, we modeled the forecast constant payment rate (CPR) at 5.8%. During the recessionary period, we model the prepayment rate at 1%, before gradually reverting to a high prepayment rate under both scenarios. At the 'AA' level and above, we model an additional low prepayment scenario, which also reverts to a low prepayment rate after the recession period. MAY 15,

19 The combination of default timings, interest rates, and prepayment rates described above gives rise to different scenarios. Our ratings reflect the notes' timely payment of interest and ultimate principal under each of these scenarios at the assigned rating level. Table 3 RMBS Stress Scenarios Rating level Prepayment rate Recession start Interest rate Default timing AAA', 'AA+', and 'AA' High, forecast, and low Closing and year three Up, down, up-down, and down-up Front-loaded and back-loaded 'AA-' and below High and forecast Closing and year three Up, down, up-down, and down-up Front-loaded and back-loaded Scenario Analysis Various factors could cause downgrades of rated RMBS notes, such as increasing foreclosure rates in the securitized portfolios, house price declines, and changes in the portfolio composition. We have analyzed the effect of increased delinquencies by testing the sensitivity of the ratings to two different levels of movements. Increasing levels of delinquencies will likely cause more stress to a transaction, and would likely contribute to downgrades of rated notes. In our analysis, our assumptions for increased delinquencies are specific to a transaction, although these levels may be similar (or the same) across different transactions. The levels do not reflect any views as to whether these deteriorations will materialize in the future. However, our analysis already incorporates additional adjustments to the pool's default probability by projecting buckets of expected arrears. We adjusted our WAFF assumptions in two scenarios by assuming additional arrears of (i) 8% split between 4% in the days bucket and 4% in the 90+ days bucket and, (ii) 8% in the 90+ days bucket. This did not result in our rating deteriorating below the maximum projected deterioration that we would associate with each relevant rating level, as outlined in our credit stability criteria. Tables 4 and 5 summarize the results of our house price decline analysis. Table 4 Assuming An Additional 8% Of Arrears, Split Equally Between One Monthly Payment And Three Monthly Payments Missed--With Credit To The NHG Guarantee Ratings WAFF (%) WALS (%) Expected loss (%) AAA AA A BBB BB B WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity. MAY 15,

20 Table 5 Assuming An Additional 8% Of Arrears, All Of Which Have Missed Three Monthly Payments--With Credit To The NHG Guarantee Ratings WAFF (%) WALS (%) Expected loss (%) AAA AA A BBB BB B WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity. Sector Credit Highlights In the fourth quarter of 2016, severe delinquencies (delinquencies of more than 90 days) stabilized in our Dutch RMBS index (see "Dutch RMBS Index Report Q4 2016," published on March 1, 2017). Severe delinquencies fell to 0.36%, the lowest level since June The level of delinquencies in Dutch RMBS transactions that we rate remained one of the lowest in Europe, as the Dutch economy continued to improve and unemployment decreased to 5.40% in December 2016 (Eurostat calculation). GDP increased by 0.5% in Q4 2016, from 0.30% in Q4 2015, according to Statistics Netherlands. We expect GDP to grow by 2.0% and 1.7% in 2017 and 2018, respectively. Property prices increased by 6.7% year-on-year in December Prices increased across all regions and property types. We expect house prices to increase by 5.0% in MAY 15,

21 Chart 8 Surveillance The key performance indicators in the surveillance of this transaction will be: Total and 90-day delinquencies; Cumulative realized losses; LTV ratios; Constant prepayment rates; and Increases in credit enhancement for the notes. Table 6 STORM Transaction Comparison At Closing Transaction key features GREEN STORM 2017 B.V. GREEN STORM 2016 B.V. STORM 2016-I B.V. STORM 2015-II B.V. STORM 2015-I B.V. STORM 2014-III B.V. STORM 2014-II B.V. STORM 2014-I B.V. Net principal outstanding ( )(excluding savings loans) 413,966,507.2 (400,732,903.5) 279,922, (271,288,250) 1,955,299, (1,894,703,943) 1,313,019,329 (1,276,794,299) 2,087,325,105 (2,021,955,909) 1,311,729,805 (1,276,980,763) 764,147,179 (744,651,270) 1,089,802,351 (1,063,952,467) MAY 15,

22 Table 6 STORM Transaction Comparison At Closing (cont.) Transaction key features GREEN STORM 2017 B.V. GREEN STORM 2016 B.V. STORM 2016-I B.V. STORM 2015-II B.V. STORM 2015-I B.V. STORM 2014-III B.V. STORM 2014-II B.V. STORM 2014-I B.V. Weighted-average seasoning (months) Weighted-average original loan-to-value ratio (%) Weighted-average current indexed loan-to-value ratio (%)* Number of loans 1,744 1,263 9,625 6,301 7,021 5,935 3,482 5,553 Number of loan parts Average loan balance ( ) Weighted-average coupon on the assets (%) Arrears (as a percentage of outstanding balance; %) 3,820 2,719 21,155 14,042 16,186 12,819 8,416 12, , , , , , , , , *Indexed loan-to-value ratio according to our calculations. Related Criteria And Research Related criteria Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017 Criteria - Structured Finance - General: Methodology And Assumptions: Assessing Pools Of European Residential Loans, Dec. 23, 2016 Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, 2016 Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015 Criteria - Structured Finance - RMBS: Methodology For Assessing Mortgage Insurance And Similar Guarantees And Supports In Structured And Public Sector Finance And Covered Bonds, Dec. 7, 2014 Criteria - Structured Finance - General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014 Criteria - Structured Finance - General: Counterparty Risk Framework Methodology And Assumptions, June 25, 2013 Criteria - Structured Finance - General: Global Derivative Agreement Criteria, June 24, 2013 Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 General Criteria: Methodology: Credit Stability Criteria, May 3, MAY 15,

23 Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Related research Dutch RMBS Index Report Q4 2016, March 1, 2017 Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016 European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, EMEA RMBS Scenario And Sensitivity Analysis, Aug. 6, 2015 Analytical Team Primary Credit Analyst: Vedant Thakur, London (44) ; vedant.thakur@spglobal.com Secondary Contact: Nicola Dobson, London (44) ; nicola.dobson@spglobal.com MAY 15,

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