Madrid, October 31, 2022 — Moody’s Investors Service (“Moody’s”) today upgraded the ratings of two notes in FTA SANTANDER HIPOTECARIO 2. The upgrades reflect increased levels of credit enhancement for the affected notes and a performance of warranties better than expected.

The maximum rating that can be achieved is Aa1 (sf) for structured finance transactions in Spain, determined by the corresponding cap in the local currency of the country.

Moody’s confirmed the ratings of the Classes of Bonds which had sufficient credit enhancements to maintain their current ratings.

….Category A notes of €1,801.5 million, confirmed Aa1 (sf); previously on March 4, 2021 Confirmed Aa1 (sf)

….€51.8m Class B notes, confirmed Aa1 (sf); previously on March 4, 2021 Confirmed Aa1 (sf)

….Category C notes of 32.3 million euros, confirmed Aa1 (sf); previously on March 4, 2021 Upgraded to Aa1 (sf)

….€49.8m Class D Notes, Upgrades to A3(sf); previously on March 4, 2021 Upgraded to Baa3 (sf)

….19.6 million E class bonds, upgrades to B2 (sf); previously on March 4, 2021 Upgrade to Caa1 (sf)

RATINGS RATIONALE

The upgrade action is driven by the increase in credit enhancement for the affected tranches, as well as the decrease in key collateral assumptions, namely the expected loss (EL) assumption of the portfolio due to better than expected warranty performance.

Moody’s confirmed the ratings of the Classes of Bonds which had sufficient credit enhancements to maintain their current ratings.

Increased credit enhancement available

The sequential amortization led to the increased credit enhancement available in this transaction. The credit enhancement of the enhanced tranches has increased as follows since the previous rating action: for Class D and E Notes to 9.7% and 3.6% in October 2022, from 6.4% and 1.6% respectively.

Revised Key Collateral Assumption

As part of the rating action, Moody’s has reassessed its lifetime loss expectations for the portfolio reflecting the collateral’s performance to date.

The performance of the transaction has remained stable since the last rating decision. The total number of defaults has remained stable over the past year, with 90 days plus arrears currently representing 0.36% of the current pool balance in October 2022, compared to 0.42% in January 2021. Defaults amounts currently stand at 3.39% of the initial pool balance, stable at 3.35% in January 2021.

Moody’s reduced the expected loss assumption to 2.80% as a percentage of the initial pool balance from 2.86% due to improved performance. The assumptions of MILAN CE and recovery rate remain unchanged.

The main methodology used in these ratings was “Moody’s Approach to Rating RMBS Using the MILAN Framework” published in July 2022 and available at https://ratings.moodys.com/api/rmc-documents/390481. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

The analysis undertaken by Moody’s when initially assigning ratings of RMBS securities may focus on areas that become less relevant or generally remain unchanged during the monitoring phase. Please see “Moody’s Approach to Rating RMBS Using the MILAN Framework” for more information on Moody’s analysis at initial rating assignment and ongoing monitoring of RMBS.

Factors that would lead to an upgrade or downgrade of ratings:

Factors or circumstances that could cause ratings to improve include: (1) performance of the underlying collateral better than expected by Moody’s; (2) an increase in available credit enhancement of the Notes; (3) improving the credit quality of the counterparties to the transaction; and (4) a reduction in sovereign risk.

Factors or circumstances that could cause ratings to downgrade include: (1) an increase in sovereign risk; (2) performance of the underlying collateral below Moody’s expectations; (3) deterioration of the Notes’ available credit enhancement; and (4) deterioration in the credit quality of the counterparties to the transaction.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

The analysis relies on an assessment of the characteristics of the collateral to determine the distribution of collateral losses, ie the function correlated to an assumption about the probability of occurrence of each level of possible collateral losses. Secondly, Moody’s assesses each possible collateral loss scenario using a model that reproduces the relevant structural characteristics to deduce the payouts and therefore the ultimate potential losses for each rated instrument. The loss incurred by a rated instrument in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody’s quantitative analysis involves an evaluation of scenarios that focus on factors contributing to rating sensitivity and consider the likelihood of material collateral losses or impaired cash flows. Moody’s weights the impact on rated instruments based on its assumptions of the likelihood of events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Antonio Tena
VP – Senior Credit Officer
Structured Finance Group
Moody’s Investors Service Spain, SA
Calle Principe de Vergara, 131, 6 Planta
Madrid, 28002
Spain
JOURNALISTS: 44 20 7772 5456
Customer service: 44 20 7772 5454

Gaby Trinkaus, CFA
VP – Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Customer service: 44 20 7772 5454

Release Office:
Moody’s Investors Service Spain, SA
Calle Principe de Vergara, 131, 6 Planta
Madrid, 28002
Spain
JOURNALISTS: 44 20 7772 5456
Customer service: 44 20 7772 5454