DBRS Morningstar Confirms Rating on FCT Credit Agricole Habitat 2017

DBRS Ratings Limited (DBRS Morningstar) confirmed its rating of the Class A notes issued by FCT Credit Agricole Habitat 2017 (the Issuer) at AAA (sf).

The rating on the Class A notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in June 2052.

The rating action follows an annual review of the transaction and is based on the following analytical considerations:

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

FCT Credit Agricole Habitat 2017 is a securitisation of French home loans originated and serviced by the 39 regional banks of Crédit Agricole Mutuel (also the Sellers). The issued notes were used to fund the purchase of mortgage-backed and guarantee-backed loans to finance the acquisition, renovation, construction, and refinancing of the acquisition of residential properties located in France.

The home loans in the portfolio are either secured by the relevant properties or guaranteed by CAMCA Assurance S.A. or Crédit Logement, SA (rated AA (low) by DBRS Morningstar with a Stable trend).

PORTFOLIO PERFORMANCE
As of December 2019, no loans were two to three months in arrears or more than three months in arrears. As of the same date, the cumulative default ratio was 0.2%.

PORTFOLIO ASSUMPTIONS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 1.4% and 10.4%, from 1.5% and 12.7%, respectively.

CREDIT ENHANCEMENT
As of the December 2019 payment date, credit enhancement to the Class A notes was 19.5%, up from 16.4% 12 months prior. The subordination of the Class B notes provides credit enhancement to the Class A notes.

The transaction benefits from a nonamortising liquidity reserve funded to 1.0% of the initial balance of the Class A and Class B notes. The liquidity reserve is available to cover senior fees and interest on the Class A notes and is currently at its target balance of EUR 11.4 million.

Crédit Agricole S.A. acts as the account bank for the transaction. Based on the account bank reference rating of Crédit Agricole S.A. at AA, which is one notch below the DBRS Morningstar public Long-Term Critical Obligations Rating of AA (high), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Credit Agricole Corporate & Investment Bank (CA CIB) acts as the swap counterparty for the transaction. DBRS Morningstar's private rating of CA CIB is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology”. DBRS Morningstar 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 legal 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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for this rating include investor reports provided by EuroTitrisation SA and loan-level data provided by the European DataWarehouse GmbH.

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

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

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

DBRS Morningstar 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 February 2019, when DBRS Morningstar confirmed the rating of the Class A notes at AAA (sf).

The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.

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

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

-- DBRS Morningstar expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 1.4% and 10.4%, respectively.
-- 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 of the Class A notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to remain at AAA (sf).

Class A 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 AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

For further information on DBRS Morningstar 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 and US regulations only.

Lead Analyst: Andrew Lynch, Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 26 January 2017

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

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

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.