Fitch Ratings has affirmed the IMS Ecuadorian Mortgage 2021-1 Trust certificates at 'AAA'/Outlook Negative and the series A notes issued by Fideicomiso Mercantil Titularizacion Hipotecaria de Banco Pichincha 5 (FIMEPCH 5) at 'B-'/Outlook Stable.

RATING ACTIONS

Entity / Debt

Rating

Prior

IMS Ecuadorian Mortgage 2021-1 Trust

2021-1 44970EAA1

LT

AAAsf

Affirmed

AAAsf

Fideicomiso Mercantil Titularizacion Hipotecaria de Banco Pichincha 5

A1

LT

B-sf

Affirmed

B-sf

A2

LT

B-sf

Affirmed

B-sf

A3

LT

B-sf

Affirmed

B-sf

A4

LT

B-sf

Affirmed

B-sf

Page

of 1

VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

FIMEPCH 5

Rating Capped at Transaction Account Bank: The series A notes are capped at the rating of the Transaction Account Bank provider (currently Banco Pichincha (B-/Stable). For the 'Bsf' rating category the Transaction Account Bank must have at least the same rating as the notes, according to Fitch's Structured Finance and Covered Bonds Rating Criteria. However, in this case, the eligible bank has been defined as an entity with a rating equal to or maximum one notch below Ecuador's sovereign rating (B-/Stable), which constrains the ratings.

Stable Pool Characteristics: The portfolio has finished the replenishment phase and has been static since January 2022. Pool characteristics remained unchanged throughout the first year. As of April 2022, Fitch has updated the 17.4% weighted average foreclosure frequency (WAFF), and WA recovery rate (WARR) of 81.6% for the 'B-sf' stress scenario, close to closing assumptions of 17.0% WAFF and 85.2% WARR.

These assumptions consider the assets main characteristics, with the original 66.7% loan-to-value (OLTV) average, the assets original term averaging 210 months, the remaining term averaging 164 months, and 30.4% of the portfolio concentrated in properties valued equal to or less than 300 minimum wages at origin. As of April 2022, just one loan (0.04%) reached 180 dpd, and another loan (0.02%) has been restructured. The portfolio has performed according to Fitch's original expectations.

Adequate Capital Structure Supports Ratings: The series A notes benefit from a sequential pay structure, where their target amortization payments are senior to interest and principal payments on the series B notes. Series A also benefits from CE of 10.6% as of April 2022 and an interest reserve account equivalent to 3x their next interest payment, which allows them to pass the 'B-sf' stress. In addition, although they benefit from excess spread, due to their Net WAC feature, Fitch does not consider this variable.

Higher Stresses Applied Due to Ecuador's Macroeconomic Environment: Ecuador's Issuer Default Ratings are 'B-'/Stable and its Country Ceiling (CC) is 'B-'. Fitch applied higher stresses to the rated notes to reflect the macroeconomic environment and Latin America's potential idiosyncratic risks. The stresses applied are commensurate to the stresses equivalent to three rating categories above the cap level (defined at 'B+sf' for Ecuador) for an uncapped country, in accordance with Fitch's Structured Finance and Covered Bonds Country Risk Rating Criteria.

Operational Risk Mitigated: Pursuant to the servicer agreement, Banco Pichincha will perform the role of primary servicer. Fitch has reviewed Banco Pichincha's systems and procedures and is satisfied with its servicing capabilities. Additionally, Corporacion de Desarrollo de Mercado Secundario de Hipotecas CTH S.A. (CTH) has been designated as master and back-up servicer, mitigating the exposure to operational risk.

IMS Ecuadorian Mortgage 2021-1 Trust

DFC Credit Quality Supports Rating: The rating assigned to the 2021-1 certificates is commensurate with the guarantee provider's credit quality. The DFC's credit quality is directly linked to the U.S. sovereign rating (AAA/F1+/Negative), as guarantees issued by, and obligations of, the DFC are backed by the full faith and credit of the U.S. government, pursuant to the Foreign Assistance Act of 1969.

Reliance on DFC Guaranty: Fitch assumes the payment on the notes will rely on the DFC guaranty. Through this guaranty the DFC will unconditionally and irrevocably guarantee the receipt of proceeds from the underlying notes in an amount sufficient to cover timely scheduled interest amounts (considering the minimum between the class A2 and A4 interest rate minus Trust expenses and 3.4%) and the ultimate principal amount on the certificates. The DFC guaranty effectively protects noteholders, taking into consideration the scope of the guaranty, the claim process and the timing required for the guarantor to disburse the funds to the issuer.

Ample Liquidity: The transaction benefits from liquidity, in the form of a five-day buffer between payment dates on the underlying notes and payment dates on the certificates. Additionally, the certificates benefit from a three-month debt service reserve account at the underlying note level and a guaranty fee reserve account that was funded at transaction closing and will be utilized throughout the life of the certificates to ensure the guaranty fee due to the guarantor is paid in a timely manner. Fitch considers this sufficient to keep debt service current on the guaranteed certificates until funds are received under a DFC Guaranty claim and that the guaranty will not terminate as a result of a failure to pay the guaranty fee.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The ratings are sensitive to the Ecuadorian sovereign's credit quality, as well as Banco Pichincha's (acting as the transaction account bank holder) credit quality. A downgrade of Ecuador's ratings (especially of its Country Ceiling) or adowngrade of Banco Pichincha would result in a downgrade of the series A notes.

The transaction's performance may also be affected by changes in market conditions and economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce CE available to the notes.

Additionally, unanticipated declines in recoveries could result in lower net proceeds, which may make certain note ratings susceptible to potential negative rating actions depending on the extent of the decline in recoveries.

For IMS Ecuadorian Mortgage 2021-1 Trust, the certificates' rating is directly linked to the credit quality of DFC, the guaranty provider. The DFC's credit quality is directly linked to the U.S. sovereign rating, as guarantees issued by, and obligations of, DFC are backed by the full faith and credit of the U.S. government, pursuant to the Foreign Assistance Act of 1969. The rating could be downgraded if the U.S. sovereign rating is downgraded.

Fitch has revised its global economic outlook forecasts as a result of the Ukraine War and related economic sanctions. Downside risks have increased, and Fitch has published an assessment of the potential rating and asset performance impact of a plausible, but worse-than-expected, adverse stagflation scenario on Fitch's major SF and CVB sub-sectors (please see 'What a Stagflation Scenario Would Mean for Global Structured Finance' at www.fitchratings.com).

Fitch expects the Ecuadorian RMBS portfolio in the assumed adverse scenario would experience a 'Mild to Modest Impact,' indicating asset performance would be modestly negatively affected relative to current expectations. Downside risks have increased and slowing home price growth, lower GDP and higher inflation could pressure mortgage performance. However, ratings are expected to remain resilient given sufficient levels of credit enhancement, having a 'Virtually No Impact' assessment.

For the certificates, the impacts of the Ukraine War are incorporated into Fitch's view of the sovereign's credit quality and may therefore indirectly affect the transaction's rating.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

The ratings assigned to the class A notes issued by FIMEPCH 5 are sensitive to the credit quality of the Ecuadorian sovereign, as well as to the credit quality of Banco Pichincha (acting as the transaction account bank holder). An upgrade of the sovereign rating of Ecuador (especially of its Country Ceiling) and an upgrade of Banco Pichincha could result in an upgrade of the series A notes.

Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels.

For IMS Ecuadorian Mortgage 2021-1 Trust, the rating of the certificates is directly linked to the credit quality of DFC, the guaranty provider. The credit quality of DFC is directly linked to the U.S. sovereign rating, as guarantees issued by, and obligations of, DFC are backed by the full faith and credit of the U.S. government, pursuant to the Foreign Assistance Act of 1969. The Rating Outlook could be revised to Stable if the U.S. sovereign rating Outlook is revised to Stable from Negative.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS

The credit quality of the Series A notes is currently capped at and driven by the rating of the Transaction Account Bank, Banco Pichincha, as measured by its LT IDR and the Country Ceiling of Ecuador.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

Additional information is available on www.fitchratings.com

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