Composition of the assets
Compagnie de Financement Foncier’s assets are high quality and diversified, in terms of counterparty type but also in terms of geographic breakdown.
Public sector
Public sector exposures consist of loans, commitments, liquidity guarantees and bonds that Compagnie de Financement Foncier finances at the best possible terms.
SCF are allowed to invest in public sector entities within the European Community and the European Economic Area, and in Switzerland, the United States, Canada, Japan, Australia and New Zealand. Exposure to public authorities outside of the EEC must offer the highest credit rating to be eligible for SCF investment.
Specific components of public sector exposures :
- Public authority exposures offer the highest credit ratings
- 52.0% of all exposures, excluding replacement securities, are secured by a direct or indirect public guarantee at December 31, 2010.
- An exposure mostly located in France and an international diversification of exposure to 15 countries
Compagnie de Financement Foncier may be exposed to the French public sector entities such as national government, local authorities or local government groups. These assets, loans and securities, are intrinsically of high quality since they are implicitly guaranteed by the French Government and indefinitely.
The international public financing activity consists of financing foreign local or regional authorities, notably by way of loans or subscribing to bond securities. These counterparts benefit from a high credit quality due to the very strong rating of the countries in which these local governments are located, i.e. the euro area, Switzerland, Japan, Canada and the United States.
At the end of 2010, outstanding exposure in this market totaled €25.2 billion.
Residential mortgage loans
Compagnie de Financement Foncier does not permit itself to buy loans on commercial real estate.
Loans secured by a first-rank mortgage or equivalent guarantee are eligible when the underlying property is located in the European Economic Area or in a country with the highest credit rating
Residential mortgage loans characteristics
- in France: loans are purchased or refinanced with CFF
- international:
- senior tranches of exclusively European RMBS
- 94% of these are at least AAA rated
- regularly stress tested
Residential mortgage loans have two distinctive features: 1) their purpose, which is to finance a housing purchase; 2) the mortgage, which enables the loan to be secured with the underlying property. The mortgage enables the lender to be paid from the sale of the property before other creditors if the borrower defaults. Loans are first originated by Crédit Foncier using a scoring method that considers the characteristics of the property to be financed, customer information and the historic probability of default.
A tool is then used to score residential mortgage loans and select those whose probability of default is below certain threshold and in some cases after an observation period.
In this market the Company holds all securities until maturity, since they are seen from a strategic perspective as being loans originated in neighboring continental European countries that offer a culture and legal environment and that is very similar to that in which Crédit Foncier has historically operated its mortgage lending business.
Compagnie de Financement Foncier purchases only senior tranches with at least two AAA ratings and backed by residential mortgage loans whose quality is equivalent to French mortgage loans.
Asset breakdown
