Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review of FT RMBS Prado VII on 9 September 2022. The credit ratings remain as follows:

Class A notes (ES0305508006), EUR 358.6m outstanding: AAA_SF

Class B notes (ES0305508014), EUR 38.6m outstanding: A-_SF

Class C notes (ES0305508022), EUR 33.5m outstanding: not rated

FT RMBS Prado VII is a static cash securitisation consisting of prime residential mortgage loans originated by UCI, extended to individual borrowers residing in Spain.

The review was conducted based on available investor reports reflecting performance up to the 15 June 2022 payment date.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The cash reserve fund has been consistently at its target level since closing, and the turbo amortisation event and the class B interest deferral trigger have never been breached and were well below their trigger levels due to good portfolio performance.

The ratings consider the issuer’s exposure to key counterparties. The credit profile of Banco Santander S.A. combined with the appropriate counterparty downgrade and replacement mechanisms are effective at mitigating the transaction’s counterparty risk.

CREDIT-POSITIVE (+)

Increased credit enhancement. As a result of portfolio repayment and sequential notes repayment, the rated notes have increased their levels of credit support. Class A credit enhancement has increased to 18.7% from 16.0% at closing, while that for class B increased to 9.8% from 8.5% over the same period.

Good performance. As of June 2022, delinquencies more than 180 days past due were low (2 bps of the total pool principal balance outstanding), no defaults were reported since closing, and no loans were in moratorium.

CREDIT-NEGATIVE (-)

Macroeconomic uncertainties. Scope expects 4.6% GDP growth and a 13.4% unemployment rate in Spain for 2022. The unemployment rate, which is one of the main macroeconomic drivers for the performance of the mortgage pool since September 2020, has been decreasing, showing a positive trend. However, the war in Ukraine has caused spikes in energy prices as well as supply-chain disruptions that have further fuelled price increases, pushing up inflation to 10.4% in August 2022. The high inflation will squeeze debtors’ available income, putting further pressure on their ability to pay mortgages.

The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, 17 December 2021; Counterparty Risk Methodology, 14 July 2022) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Miguel Barata, Director

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