Moody's: Spanish mortgage securitisation volumes starving covered bonds of collateral

The high volume of Spanish mortgage securitisation has reduced the amount of collateral for Spanish covered bonds ("cédulas hipotecarias"), which is negative for covered bondholders, says Moody's Investors Service.

"The level of over-collateralization (OC) in Spanish cédulas hipotecarias remains the highest in Europe, at 150% on a weighted-average basis. Therefore, the negative impact on covered bondholders is limited. Moreover, the quality of cover pools is also improving, further limiting the negative impact" says Tomas Rodriguez-Vigil Lead Analyst at Moody's.

"Spanish originators have issued EUR43 billion worth of residential mortgage-backed securities since 2013, including Spain's largest-ever securitised mortgage deal that Caixabank issued in February 2016", observes Alberto Barbáchano, an Vice President and Senior Credit Officer at Moody's.

Moody's report, entitled "Excess Mortgage Collateral Fosters RMBS Securitisation, Reducing Covered Bonds Collateral", is available on www.moodys.com. The rating agency's report does not constitute a rating action.

The large volume of RMBS securitization in Spain reflects the fact that many mortgages have become "ineligible" for the purpose of issuing covered bonds after some Spanish banks voluntary revalued the properties backing mortgages to reflect house price declines. We expect that some Spanish banks will continue to look for opportunities to raise funds through RMBS securitisations over 2016, adding to the high volume of deals over the last few years.