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    BBVA RMBS 10 Spanish RMBS Rating Raised On One Class; One Class Affirmed Following Criteria Revision
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    BBVA RMBS 10 Spanish RMBS Rating Raised On One Class; One Class Affirmed Following Criteria Revision

    Overview

    • We have reviewed BBVA RMBS 10 following the expansion of the global RMBS criteria's scope to include Spain, among other countries.
    • We have raised our rating on the class B notes. At the same time, we have affirmed our rating on the class A notes.
    • BBVA RMBS 10 is a Spanish RMBS transaction, which securitizes a portfolio of first-ranking mortgage loans granted to Spanish residents.

    MADRID (S&P Global Ratings) Feb. 23, 2021--S&P Global Ratings today raised its credit rating on BBVA RMBS 10, Fondo de Titulizacion de Activos's class B notes to 'A- (sf)' from 'BBB (sf)'. At the same time, we have affirmed our 'A- (sf)' rating on the class A notes.

    Today's rating actions follow the implementation of our revised criteria and assumptions for assessing pools of Spanish residential loans (see "Related Criteria"). They also reflect our full analysis of the most recent information that we have received and the transaction's current structural features.

    Upon expanding our global RMBS criteria to include Spanish transactions, we placed our rating on the class B notes under criteria observation. Following our review of the transaction's performance and the application of our updated criteria for rating Spanish RMBS transactions, the rating is no longer under criteria observation.

    Our weighted-average foreclosure frequency (WAFF) assumptions have decreased due to the calculation of the effective loan-to-value (LTV) ratio, which is based on 80% original LTV (OLTV) and 20% current LTV (CLTV). Under our previous criteria, we used only the OLTV. Our WAFF assumptions also declined because of the transaction's decrease in arrears. In addition, our weighted-average loss severity assumptions (WALS) have decreased, due to the lower CLTV and lower market value declines. The reduction in our WALS is partially offset by the increase in our foreclosure cost assumptions.

    Table 1

    Credit Analysis Results
    Rating WAFF (%) WALS (%) Credit coverage (%)
    AAA 17.68 36.40 6.43
    AA 12.10 32.23 3.90
    A 9.29 24.03 2.23
    BBB 7.07 19.50 1.38
    BB 4.72 16.35 0.77
    B 3.07 13.52 0.42
    WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity.

    Loan-level arrears are low at 0.42%. Overall delinquencies remain well below our Spanish RMBS index (see "Related Research").

    Cumulative defaults, defined as loans in arrears for a period equal to or greater than 18 months, represent 0.59% of the closing pool balance. The interest deferral trigger for class B is not at risk of being breached because it is defined at 11.0%, and we do not expect that this level will be reached in the near term.

    Our analysis also considers the transaction's sensitivity to the potential repercussions of the coronavirus outbreak. Of the pool, 3% of loans are on payment holidays under the Spanish sectorial moratorium schemes, and the proportion of loans with either legal or sectorial payment holidays has remained low in comparison with the market average (below 5%). The government approved a new payment holiday scheme available until March 31, 2021, where the payment holidays could last up to three months. In our analysis, we considered the potential impact of the scheme's extension and the risk the payment holidays could present should they become arrears or defaults in the future.

    Our operational, rating above the sovereign, and legal risk analyses remain unchanged since our last review. Therefore, the ratings assigned are not capped by any of these criteria.

    We consider that the transaction's documented replacement mechanisms adequately mitigate its counterparty risk exposure to BBVA, as bank account and collection account provider, up to a 'A-' rating under our current counterparty criteria. Therefore, our ratings on the notes are capped at 'A- (sf)' by our counterparty criteria.

    The servicer, BBVA, has a standardized, integrated, and centralized servicing platform. It is a servicer for many Spanish RMBS transactions, and its transactions' historical performance has outperformed our Spanish RMBS index.

    Credit enhancement available in BBVA RMBS 10 has increased since our previous review because the notes amortize sequentially and the reserve fund is at its required level.

    We have raised to 'A- (sf)' from 'BBB (sf)' our rating on the class B notes. At the same time, we have affirmed our 'A- (sf)' rating on class A notes. The class A and B notes could withstand stresses at a higher rating than the current ratings assigned. However, our ratings on class A and B notes are capped at 'A- (sf)' by our counterparty criteria.

    S&P Global Ratings believes there remains high, albeit moderating, uncertainty about the evolution of the coronavirus pandemic and its economic effects. Vaccine production is ramping up and rollouts are gathering pace around the world. Widespread immunization, which will help pave the way for a return to more normal levels of social and economic activity, looks to be achievable by most developed economies by the end of the third quarter. However, some emerging markets may only be able to achieve widespread immunization by year-end or later. We use these assumptions about vaccine timing in assessing the economic and credit implications associated with the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

    Related Criteria

    Related Research

    Primary Credit Analyst:Rocio Romero, Madrid + 34 91 389 6968;
    rocio.romero@spglobal.com
    Research Contributor:Prathamesh Khanolkar, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai

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