Fitch Downgrades Eleventh Mortgage-Backed Notes Trust's Series A Notes

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has downgraded the following Eleventh Mortgage-Backed Notes Trust's (Eleventh Trust) notes:

--$37.8 million series A senior notes to 'BBsf' from 'BB+sf'.

The Rating Outlook is revised to Stable from Negative.

Fitch's rating addresses the timely payment of interest on a monthly basis and ultimate payment of principal by legal final maturity in October 2041.

KEY RATING DRIVERS

The rating action reflects the recent downgrades of El Salvador's foreign currency Issuer Default Rating (FC IDR) to 'B+' with a Stable Outlook and country ceiling (CC) to 'BB' from 'BB+'.

According to Fitch's 'Criteria for Rating Securitizations in Emerging Markets' (November 2014), the ratings of emerging market securitizations are linked to the sovereign ratings of a particular country. While the transaction has sufficient credit enhancement to be rated above the country's FC IDR, the rating remains constrained by the country ceiling and ultimately linked to the ratings of El Salvador.

The transaction contains some liquidity to mitigate potential transfer risk, but this level is not sufficient to provide significant rating benefit to breach the CC. Additionally, Fitch believes the macroeconomic environment to be more volatile as the sovereign rating levels are decreased. When rating a transaction above the IDR of a country the transaction must have sufficient credit enhancement to withstand an increase in risk within the macroeconomic environment.

The transaction was stressed using a 6.0x historical default rate which is sufficient to go up to the CC or two notches above the FC IDR.

The Outlook revision on the transaction reflects the Stable Outlook on El Salvador's FC IDR, which indicates Fitch's assessment that upside and downside risks to the rating are currently balanced.

RATING SENSITIVITIES

The rating of the series A notes is sensitive to changes in the credit quality of El Salvador. A further downgrade of El Salvador's ratings, specifically its country ceiling ('BB'), could lead to a downgrade on the notes. In addition, severe increases in frequency of foreclosure and prepayments as well as reductions in recovery rates could lead to a downgrade of the notes.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action

TRANSACTION SUMMARY

The $37.8 million series A senior notes are backed by residential mortgages denominated in U.S. dollars made to lower-middle-income borrowers in El Salvador by La Hipotecaria. In addition, the Eleventh Mortgage Trust issued $5.4 million in series B notes and $1.8 million in series C notes, which have not been rated.

Additional information is available at www.fitchratings.com.

Sources of Information:

Fitch has checked the consistency and plausibility of the information published by La Hipotecaria and no material discrepancies were noted that would impact Fitch's rating analysis.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Rating Securitizations in Emerging Markets (pub. 06 Nov 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=809588

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for RMBS in Latin America (pub. 22 Jan 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=839629

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=987752

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987752

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150710005689/en/

Fitch Ratings
Primary Analyst
Andres de la Cuesta
Associate Director
+1-312-606-2330
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
Greg Kabance
Managing Director
+1-312-368-2052
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: [email protected]

Source: Fitch Ratings

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