FCT Credit Agricole Habitat 2022-1 -- Moody's assigns Aaa (sf) to French RMBS Notes issued by FCT CREDIT AGRICOLE HABITAT 2022-1
Rating Action: Moody's assigns Aaa (sf) to French RMBS Notes issued by FCT CREDIT AGRICOLE HABITAT 2022-1Global Credit Research - 09 Mar 2022Paris, March 09, 2022 -- Moody's Investors Service ("Moody's") has today assigned a definitive rating to Notes issued by FCT Crédit Agricole Habitat 2022-1:....EUR1,000M Class A Asset-Backed Floating Rate Notes due July 2057, Definitive Rating Assigned Aaa (sf)Moody's has not assigned any ratings to the EUR 162.8M Class B Asset-Backed Fixed Rate Notes due July 2057.RATINGS RATIONALEThe Notes are backed by a 5-year revolving pool of French residential mortgage loans originated by 39 Caisses Régionales de Crédit Agricole Mutuel ("CRCAM"). Almost all CRCAMs are rated Aa3/P-1/Aa2(cr)/P-1 (cr) and all the CRCAMs belong to the Credit Agricole group. This represents the sixth issuance out of the FCT Crédit Agricole Habitat program.The portfolio of assets amount to approximately EUR 1,989.8 million as of November 30th, 2021 pool cutoff date, and will be adjusted at closing to around EUR 1,162.8 million to match the final notes balance. The non-amortising Liquidity Reserve Fund will be funded to 0.80% of the total Notes balance at closing and the total credit enhancement for the Class A Notes will be 14.0%.The rating of the notes is based on an analysis of the characteristics of the underlying pool of home loans, sector wide and originator specific performance data, protection provided by credit enhancement, the roles of external counterparties and the structural integrity of the transaction.According to Moody's, the transaction benefits from various credit strengths such as strong historical performance, granular portfolio, and a non-amortising liquidity reserve sized at 0.80% of Class A and B Notes balance. However, Moody's notes that the transaction features some credit weaknesses such as: (i) the pool is revolving for 5 years, which could lead to an asset quality drift although this is mitigated to some extent by the portfolio concentration limits; and (ii) unrated guarantor, 60.4% of the pool are caution loans guaranteed by CAMCA (NR).Moody's determined the portfolio lifetime expected loss of 0.50% and MILAN credit enhancement ("MILAN CE") of 10% related to borrower receivables. The expected loss capture our expectations of performance considering the current economic outlook, while the MILAN CE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. Expected defaults and MILAN CE are parameters used by Moody's to calibrate its lognormal portfolio loss distribution curve and to associate a probability with each potential future loss scenario in the ABSROM cash flow model to rate RMBS.Portfolio expected loss of 0.50%: This is lower than the French RMBS sector and is based on Moody's assessment of the lifetime loss expectation for the pool taking into account: (i) the collateral performance of CRCAMs originated loans to date, as provided by the originator and observed in previously securitised portfolios; (ii) the current and future macroeconomic environment in France; (iii) benchmarking with other French RMBS transactions.; and (iv) the potential drift in asset quality since new loans can be added to the pool during the revolving period subject to certain conditions being met.MILAN CE of 10%: This is in line with the French RMBS sector average and follows Moody's assessment of the loan-by-loan information taking into account the following key drivers: (i) approx. 96.3% of the loans have never been in arrears and the portfolio is on average approx. 3.9 years seasoned; (ii) the pool only contains loans that are backed by the borrowers main residence, i.e. no secondary homes or investment properties; (iii) approx. 69.3% of the loans in the pool are caution-loans, 8.9% are guaranteed by Crédit Logement (Aa3) and the remaining 60.4% are guaranteed by CAMCA (NR); and (iv) the 5 years revolving period, which could lead to an asset quality drift although this is mitigated to some extent by the portfolio concentration limits.The principal methodology used in this rating was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in February 2022 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1278125. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.The analysis undertaken by Moody's at the initial assignment of ratings for RMBS securities may focus on aspects that become less relevant or typically remain unchanged during the surveillance stage. Please see "Moody's Approach to Rating RMBS Using the MILAN Framework" for further information on Moody's analysis at the initial rating assignment and the on-going surveillance in RMBS.Factors that would lead to an upgrade or downgrade of the rating:Factors that may lead to a downgrade of the rating include significantly higher losses compared with our expectations at close, due to either a change in economic conditions from our central scenario forecast or idiosyncratic performance factors. Downward pressure on the rating could also result from weakening counterparty's credit profiles, particularly looking at CRCAM and CACIB, which perform numerous roles in the transaction.REGULATORY DISCLOSURESFor further specification of Moodys key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moodys Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moodys evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs 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.Moodys quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moodys weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. 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