Defvas Project
In Partnership with TEGoVA and the IRRV
EUROPEAN VALUATION APPLICATION - 3PROPERTY VALUATION FOR SECURITISATION PURPOSES
Defvas Project
In Partnership with TEGoVA and the IRRV
INTRODUCTION
• The securitisation of property has become an important
source of financial instruments in capital markets
• The creator of the securities benefits from the removal of
property related assets from its balance sheet
• These securities offer their purchasers a chance to diversify
their funding
• Where property based securities have been created from mortgages,
investors are principally exposed to changes in:
- the underlying value of properties securing the mortgages, and
- the income from those mortgages
• As every investment decision is based on the ability of a property to
produce revenue.
Defvas Project
In Partnership with TEGoVA and the IRRV
SCOPE
• This EVA applies to property valuation for the purpose
of valuing these securities
• Valuations relevant to REIT’s, property trusts and
property unit trusts are considered in EVA1
• The assessment of other risks relating to the assets, are not
considered by this EVA.
Defvas Project
In Partnership with TEGoVA and the IRRV
DEFINITIONS
• Property Securitisation• Property-Related Asset-Backed Securities (PRABSs)• Residential Mortgage Back Securities (RMBS)• Commercial Mortgage Backed Securities (CMBS)• A Special Purpose Vehicle (SPV)• Net Asset Value• A Sustainable Net Asset Value or Sustainable Asset Value• Market Value• Mortgage Lending Value• A Risk Profile
Defvas Project
In Partnership with TEGoVA and the IRRV
STATEMENT OF THE APPLICATION
• Where the valuation will be used to secure a loan this will normally be on the basis of the Market Value. In some jurisdictions, the Mortgage Lending Value may also be used
• When undertaking a valuation for securitisation purposes, valuers should focus on the market and property related risks relevant to the property
• TEGoVA recommends valuers to undertake their tasks in two stages:- The conventional valuation- Assessment of the specific property risk profile
Defvas Project
In Partnership with TEGoVA and the IRRV
COMMENTARY
• The first step is to consider the individual underlying properties
• The valuer should prepare a structured risk assessment
• Valuations and risk assessments are carried out within the context of the market
• The second step, where a portfolio of properties is being assessed, is to assess the entire portfolio
• Cluster analysis• The validity of the market value of the individual
properties should be verified• Sustainable net asses value