Ratings On Seven Metrofinanciera RMBS Series Affirmed

Stocks and Financial Services Press Releases Thursday April 27, 2017 09:01
NEW YORK--27 Apr--S&P Global Ratings

NEW YORK (S&P Global Ratings) April 26, 2017--S&P Global Ratings affirmed today its long-term global and Mexico National (CaVal) scale ratings on seven Mexican residential mortgage-backed securities (RMBS) transactions originated and serviced by Metrofinanciera S.A.P.I. de C.V. SOFOM E.R. (Metrofinanciera; see list).

The rating affirmations reflect our view that the transactions' credit enhancement levels--in the form of overcollateralization, excess spread, cash reserves and partial cedit guarantees (PCGs, for series METROCB 04U, METROCB 05U, MFCB 05U, and MTROFCB 08)--combined with our updated foreclosure frequency and loss severity assumptions, continue to be sufficient to withstand our stress scenarios consistent with their current rating levels.

The affirmations also consider the portfolios' relatively stable performance since our last rating actions in February 2015, as well as our opinion that the transactions' counterparty, operational, legal, and credit risks continue to be consistent with their current ratings.

According to servicer reports, as of February 2017, the pools backing each of the series showed nonperforming loans levels (delinquencies greater than 90 days past due, measured as a percentage over the initial balance) lower than those observed at the time of our last rating actions. This was driven by Metrofinanciera's continued reporting of foreclosed property sales for the transactions. The lower levels also reflect the servicer's collection efforts and the positive effects derived from the loan modification programs implemented in the past years.

As of February 2017, the total credit enhancement levels for series METROCB 04U, METROCB 06U, and MTROFCB 08 increased slightly from those observed at the time of our last rating actions, partly because of the additional flows realized from the sales of foreclosed properties and the recovery of the nonperforming loan ratios.

Credit enhancement levels for series METROCB 05U and MFCB 05U have dropped; however, we believe that they continue to be consistent with their current rating levels. Finally, credit enhancement for series MTROCB 07U and MTROCB 08U decreased to -115.22% and -127.42%, respectively, from -88.10% and -88.48% as of December 2014.

The PCGs provided by Sociedad Hipotecaria Federal S.N.C. for series METROCB 05U and MFCB 05U can be only be disbursed to cover interest shortfalls under possible liquidity events or principal at maturity. However, they cannot be disbursed to restore the parity between current assets and liabilities; therefore, their capacity to absorb losses is limited.

In our view, a short-term interest shortfall on series MFCB 05U is mitigated by its PCG. However, in case it is fully disbursed, the transaction could default on its monthly interest payments derived from its negative financial margin and its dual payment waterfall structure.

Series MTROCB 07U missed an interest payment in June 2016, but the transaction has resumed its monthly payments under its original terms since July 2016. Nonetheless, we affirmed our global and national 'D (sf)' rating, reflecting our view that a default on principal repayment at the maturity date is virtually certain, according to "Post-Default Ratings Methodology: When Does S&P Global Ratings Raise A Rating From 'D' Or 'SD'?" published March 23, 2015. This view is mainly based on the transaction's current overcollateralization, which was -115.22% as of February 2017.

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