Information required pursuant to Circular 5/2011 of the Bank of Spain is indicated as follows.
a) Mortgage market policies and procedures
The Bank has express policies and procedures in place regarding its activities in the mortgage market, which provide for full compliance with applicable regulations.
The mortgage origination policy is based in principles focused on assessing the adequate ratio between the amount of the loan, and the payments, and the income of the applicant. Applicants must in all cases prove sufficient repayment ability (present and future) to meet their repayment obligations, for both the mortgage debt and for other debts detected in the financial system, and even those from an estimate of their current expenses deduced from socio-demographic information. Therefore, the applicant’s repayment ability is a key aspect within the credit decision-making tools and retail risk acceptance manuals, and has a high weighting in the final decision.
During the mortgage risk transaction analysis process, documentation supporting the applicant’s income (payroll, etc.) is required, and the applicant’s position in the financial system is checked through automated database queries (internal and external). This information is used for calculation purposes in order to determine the level of indebtedness/compliance with the remainder of the system. This documentation is kept in the transaction’s file.
In addition, the mortgage origination policy assesses the adequate ratio between the amount of the loan and the appraisal value of the mortgaged asset. If an appropriate level is not exceeded, additional collateral is required to reinforce the transaction’s hedging. The policy also establishes that the property to be mortgaged be appraised by an independent appraisal company as established by Circular 3/2010. BBVA selects those companies whose reputation, standing in the market and independence ensure that their appraisals adapt to the market reality in each region. Each appraisal is reviewed and checked before the loan is granted by BBVA staff and, in those cases where the loan is finally granted, it is kept in the transaction’s file.
As for issues related to the mortgage market, the Group’s Finance Division annually defines the wholesale finance issue strategy, and more specifically mortgage bond issues, such as mortgage covered bonds or mortgage securitization. The Assets and Liabilities Committee (“ALCO”) tracks the budget monthly. The volume and type of assets in these transactions is determined in accordance with the wholesale finance plan, the trend of the Bank’s “Loans and receivables” outstanding balances and market conditions.
The Board of Directors of the Bank authorizes each of the issues of Mortgage Transfer Certificate and/or Mortgage Participation issued by BBVA to securitize loans and mortgage loans, as well as the establishment of a Base Prospectus for the issue of fixed-income securities through which the mortgage-covered bonds are implemented, based on the agreements for the issue of fixed-income securities approved by the Annual General Meeting.
As established in article 24 of Royal Decree 716/2009, the volume of outstanding mortgage-covered bonds issued by a bank may not exceed 80% of a calculation base determined by adding the outstanding principal of all the loans and mortgage loans in the bank’s portfolio that are eligible and are not covered by the issue of Mortgage Bonds, Mortgage Participations or Mortgage Transfer Certificates. For these purposes, in accordance with the aforementioned Royal Decree 716/2009, in order to be eligible, loans and mortgage loans must: (i) be secured by a first mortgage on the freehold; (ii) the loan’s amount may not exceed 80% of the appraisal value for home mortgages, and 60% for other mortgage lending; (iii) be established on assets exclusively and wholly owned by the mortgagor; (iv) have been appraised by an independent appraisal company unrelated to the Group and authorized by the Bank of Spain; and (v) the mortgaged property must be covered at least by a current damage insurance policy.
The Bank has set up a series of controls for mortgage covered bonds, which regularly control the total volume of issued mortgage covered bonds issued and the remaining eligible collateral, to avoid exceeding the maximum limit set by Royal Decree 716/2009, and outlined in the preceding paragraph. In the case of securitizations, the preliminary portfolio of loans and mortgage loans to be securitized is checked by the Bank’s external auditor as required by the Spanish Securities and Exchange Commission. There is also a series of filters through which some mortgage loans and credits are excluded in accordance with legal, commercial and risk concentration criteria.
b) Quantitative information on activities in the mortgage market
The quantitative information on activities in the mortgage market required by Bank of Spain Circular 5/2011 is shown below.
b.1) Assets operation
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| Mortgage loans. Eligibility for the purpose of the mortgage market. |
|
Millions of Euros | |
|---|---|---|---|
|
|
December 2014 |
December 2013 |
|
| Nominal value of outstanding loans and mortgage loans | (A) | 104.217 | 108.962 |
| Minus: Nominal value of all outstanding loans and mortgage loans that form part of the portfolio, but have been mobilized through mortgage bond holdings or mortgage transfer certificates. | (B) | (24.390) | (21.551) |
| Nominal value of outstanding loans and mortgage loans, excluding securitized loans | (A)-(B) | 79.827 | 87.411 |
| Of which: |
|
- |
|
| Loans and mortgage loans which would be eligible if the calculation limits set forth in Article 12 of Spanish Royal Decree 716/2009 were not applied. | (C) | 42.920 | 58.742 |
| Minus: Loans and mortgage loans which would be eligible but, according to the criteria set forth in Article 12 of Spanish Royal Decree 716/2009, cannot be used to collateralize any issuance of mortgage bonds. | (D) | (2.738) | (3.590) |
| Eligible loans and mortgage loans that, according to the criteria set forth in Article 12 of Spanish Royal Decree 716/2009, can be used as collateral for the issuance of mortgage bonds | (C)-(D) | 40.182 | 55.152 |
| Issuance limit: 80% of eligible loans and mortgage loans that can be used as collateral | (E ) | 32.145 | 44.122 |
| Issued mortgage-covered bonds | (F) | 29.958 | 40.865 |
| Outstanding Mortgage-covered bonds |
|
27.210 | 39.169 |
| Capacity to issue mortgage-covered bonds (*) | (E)-(F) | 2.187 | 3.257 |
| Memorandum items: |
|
- |
|
| Percentage of overcollateralization across the portfolio |
|
266% | 214% |
| Percentage of overcollateralization across the eligible used portfolio |
|
134% | 135% |
| Nominal value of available sums (committed and unused) from all loans and mortgage loans. |
|
1.900 | 1.633 |
| Of which: |
|
|
|
| Potentially eligible |
|
1.322 | 1.365 |
| Ineligible |
|
578 | 268 |
| Nominal value of all loans and mortgage loans that are not eligible, as they do not meet the thresholds set in Article 5.1 of Spanish Royal Decree 716/2009, but do meet the rest of the eligibility requirements indicated in Article 4 of the Royal Decree. |
|
30.810 | 23.698 |
| Nominal value of the replacement assets subject to the issue of mortgage-covered bonds. |
|
- | - |
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| Mortgage loans. Eligibility for the purpose of the mortgage market. |
|
Millions of Euros | |
|---|---|---|---|
|
|
2014 | 2013 | |
| Total loans | (1) | 104,217 | 108,962 |
| Issued mortgage participations | (2) | 3 | 12 |
| Of which: recognized on the balance sheet |
|
- | - |
| Issued mortgage transfer certificates | (3) | 24,387 | 21,539 |
| Of which: recognized on the balance sheet |
|
24,345 | 21,492 |
| Mortgage loans as collateral of mortgages bonds | (4) | - | - |
| Loans supporting the issuance of mortgage-covered bonds | 1-2-3-4 | 79,827 | 87,411 |
| Non eligible loans |
|
36,907 | 28,669 |
| Comply requirements to be eligible except the limit provided for under the article 5.1 of the Spanish Royal Decree 716/2009 |
|
30,810 | 23,698 |
| Rest |
|
6,097 | 4,971 |
| Eligible loans |
|
42,920 | 58,742 |
| That can not be used as collateral for issuances |
|
2,738 | 3,590 |
| That can be used as collateral for issuances |
|
40,182 | 55,152 |
| Loans used to collateralize mortgage bonds |
|
- | - |
| Loans used to collateralize mortgage-covered bonds |
|
40,182 | 55,152 |
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|
|
Millions of Euros | |||||
|---|---|---|---|---|---|---|
|
|
December 2014 | December 2013 | ||||
| Mortgage loans. Classification of the nominal values according to different characteristics | Total mortgage loans | Eligible (*) | Eligible that can be used as collateral for issuances (**) | Total mortgage loans | Eligible (*) | Eligibles that can be used as collateral for issuances (**) |
| TOTAL | 79,827 | 42,920 | 40,182 | 87,411 | 58,742 | 55,152 |
| By source of the operations |
|
|
|
|
|
|
| Originated by the bank | 69,794 | 35,600 | 32,945 | 78,194 | 49,963 | 46,460 |
| Subrogated by other institutions | 928 | 703 | 698 | 1,153 | 1,026 | 1,019 |
| Rest | 9,105 | 6,617 | 6,539 | 8,064 | 7,753 | 7,673 |
| By Currency |
|
|
|
|
|
|
| In euros | 79,462 | 42,920 | 40,182 | 87,033 | 58,557 | 54,977 |
| In foreign currency | 365 | - | - | 378 | 185 | 175 |
| By payment situation |
|
|
|
|
|
|
| Normal payment | 59,012 | 35,268 | 34,509 | 65,459 | 48,784 | 47,690 |
| Other situations | 20,815 | 7,652 | 5,673 | 21,952 | 9,958 | 7,462 |
| By residual maturity |
|
|
|
|
|
|
| Up to 10 years | 18,434 | 10,733 | 9,377 | 17,574 | 10,640 | 9,155 |
| 10 to 20 years | 24,768 | 17,939 | 17,276 | 25,736 | 20,278 | 19,400 |
| 20 to 30 years | 23,027 | 10,619 | 10,030 | 27,956 | 19,962 | 18,957 |
| Over 30 years | 13,598 | 3,629 | 3,499 | 16,145 | 7,862 | 7,640 |
| By Interest Rate |
|
|
|
|
|
|
| Fixed rate | 3,211 | 863 | 687 | 2,706 | 947 | 731 |
| Floating rate | 76,616 | 42,057 | 39,495 | 84,705 | 57,795 | 54,421 |
| Mixed rate | - | - | - | - | - | - |
| By Target of Operations |
|
|
|
|
|
|
| For business activity | 22,483 | 7,232 | 5,065 | 21,414 | 8,042 | 5,204 |
| From which: public housing | 10,421 | 2,519 | 875 | 10,345 | 3,574 | 1,245 |
| For households | 57,344 | 35,688 | 35,117 | 65,997 | 50,700 | 49,948 |
| By type of guarantee |
|
|
|
|
|
|
| Secured by completed assets/buildings | 72,770 | 41,565 | 39,471 | 80,528 | 57,156 | 54,367 |
| Residential use | 63,083 | 37,547 | 36,038 | 71,039 | 53,209 | 50,993 |
| From which: public housing | 6,253 | 3,845 | 3,536 | 7,463 | 6,747 | 6,273 |
| Commercial | 9,687 | 4,018 | 3,433 | 9,182 | 3,947 | 3,374 |
| Other | - | - | - | 307 | - | - |
| Secured by assets/buildings under construction | 2,350 | 380 | 262 | 2,547 | 546 | 350 |
| Residential use | 1,888 | 261 | 163 | 2,083 | 411 | 240 |
| From which: public housing | 100 | 7 | 3 | 126 | 78 | 42 |
| Commercial | 462 | 119 | 99 | 464 | 135 | 110 |
| Other | - | - | - | - | - | - |
| Secured by land | 4,707 | 975 | 449 | 4,336 | 1,040 | 435 |
| Urban | 2,021 | 442 | 135 | 1,753 | 482 | 131 |
| Non-urban | 2,686 | 533 | 314 | 2,583 | 558 | 304 |
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|
|
Millions of Euros | ||||
|---|---|---|---|---|---|
|
|
Loan to Value (Last available appraisal risk) | ||||
| December 2014 Nominal value of the total mortgage loans |
Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% | Total |
| Home mortgages | 9,518 | 13,848 | 14,617 |
|
37,983 |
| Other mortgages | 2,454 | 2,483 |
|
|
4,937 |
| Total | 11,972 | 16,331 | 14,617 | - | 42,920 |
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|
|
Millions of Euros | ||||
|---|---|---|---|---|---|
|
|
Loan to Value (Last available appraisal risk) | ||||
| December 2013 Nominal value of the total mortgage loans |
Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% | Total |
| Home mortgages | 12,561 | 18,939 | 22,012 |
|
53,512 |
| Other mortgages | 2,478 | 2,752 |
|
|
5,230 |
| Total | 15,039 | 21,691 | 22,012 | - | 58,742 |
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|
|
Millions of Euros | |||
|---|---|---|---|---|
|
|
December 2014 | December 2013 | ||
| Eligible and non eligible mortgage loans. Changes of the nominal values in the period |
Eligible (*) | Non eligible | Eligible (*) | Non eligible |
| Balance at the beginning | 58,742 | 28,669 | 69,598 | 14,147 |
| Retirements | 17,832 | 5,901 | 24,428 | 4,587 |
| Held-to-maturity cancellations | 5,055 | 3,231 | 5,784 | 2,468 |
| Anticipated cancellations | 342 | 606 | 1,477 | 421 |
| Subrogations to other institutions | - | - | 5 | 1 |
| Rest | 12,435 | 2,064 | 17,162 | 1,697 |
| Additions | 2,010 | 14,139 | 13,572 | 19,109 |
| Acquisition of Unnim | - | - | 10,958 | 2,753 |
| Originated by the bank | 1,819 | 3,382 | 2,516 | 3,647 |
| Subrogations to other institutions | 5 | 3 | 12 | 4 |
| Rest | 186 | 10,754 | 86 | 12,705 |
| Balance at the end | 42,920 | 36,907 | 58,742 | 28,669 |
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|
|
Millions of Euros | |
|---|---|---|
| Mortgage loans supporting the issuance of mortgage-covered bonds Nominal value. |
December 2014 |
December 2013 |
| Potentially eligible | 1,322 | 1,365 |
| Ineligible | 578 | 268 |
| Total | 1,900 | 1,633 |
b.2) Liabilities operations
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|
|
Millions of Euros | |||
|---|---|---|---|---|
|
|
December 2014 | December 2013 | ||
| Issued Mortgage Bonds | Nominal value | Average residual maturity | Nominal value | Average residual maturity |
| Mortgage bonds | - |
|
- |
|
| Mortgage-covered bonds | 29,958 |
|
40,865 |
|
| Of which: Non recognized as liabilities on balance | 2,748 |
|
39,169 |
|
| Of Which: outstanding | 27,210 |
|
7,810 |
|
| Debt securities issued through public offer | 22,620 |
|
28,027 |
|
| Residual maturity up to 1 year | 3,598 |
|
6,407 |
|
| Residual maturity over 1 year and less than 2 years | 4,500 |
|
3,598 |
|
| Residual maturity over 2 years and less than 3 years | 6,772 |
|
4,500 |
|
| Residual maturity over 3 years and less than 5 years |
|
|
6,772 |
|
| Residual maturity over 5 years and less than 10 years | 5,550 |
|
4,550 |
|
| Residual maturity over 10 years | 2,200 |
|
2,200 |
|
| Debt securities issued without public offer | 2,272 |
|
7,227 |
|
| Residual maturity up to 1 year | - |
|
200 |
|
| Residual maturity over 1 year and less than 2 years | - |
|
- |
|
| Residual maturity over 2 years and less than 3 years | 150 |
|
- |
|
| Residual maturity over 3 years and less than 5 years | - |
|
150 |
|
| Residual maturity over 5 years and less than 10 years | 2,000 |
|
2,500 |
|
| Residual maturity over 10 years | 122 |
|
4,377 |
|
| Deposits | 5,066 |
|
5,611 |
|
| Residual maturity up to 1 year | 993 |
|
530 |
|
| Residual maturity over 1 year and less than 2 years | 1,064 |
|
993 |
|
| Residual maturity over 2 years and less than 3 years | 460 |
|
1,079 |
|
| Residual maturity over 3 years and less than 5 years | 815 |
|
1,099 |
|
| Residual maturity over 5 years and less than 10 years | 843 |
|
1,019 |
|
| Residual maturity over 10 years | 891 |
|
891 |
|
| Mortgage participations | - |
|
- | - |
| Mortgage transfer certificates | 24,345 | 289 | 21,492 | 287 |
| Issued through public offer | 24,345 | 289 | 21,492 | 287 |
| Issued without public offer | - | - | - | - |
Given the characteristics of the type of covered bonds issued by the Bank, there is no substituting collateral related to these issues.
The Bank does not hold any derivative financial instruments relating to mortgage bond issues, as defined in the aforementioned Royal Decree.