Comments

Independent inspector

As stipulated in the Swedish covered bonds act, the Swedish FSA has appointed an independent inspector for each issuing institution. The inspector is required to look after that the covered bond register is maintained in a correct manner and in accordance with the provisions of Swedish covered bond act. The inspector is required to regularly report any findings to the Swedish FSA. An issuing institution is required to provide the inspector with any information requested regarding the institution's activities related to covered bonds. The inspector is entitled to conduct investigations at the issuing institution's premises.

OC

Given the dynamic nature of the Nordea Hypotek cover pool the OC (Over Collateralisation) in Nordea Hypotek is subject to customer behaviour, market value of the underlying collateral as well as issuance and redemptions of outstanding covered bond debt. Nordea Hypotek is conducting its funding operations with the objective of maintaining the OC well above the legal requirements.

LTV calculation

The LTV (Loan to Value) of Nordea Hypotek is calculated per property meaning that, in the case there is more than one loan using the same property as collateral, the LTV is calculated using the accumulated loan volume per property. The resulting total LTV is assigned to all loans using this property as collateral.

Pre-payment risk

Pursuant to the Swedish consumer credit act, a consumer is entitled to repay his debt to the lender prior to the agreed due date. In case of an early repayment, the consumer shall pay interest and other costs for the credit for the period up until the early repayment, but not for the period thereafter. The lender shall not be entitled to any compensation on the basis that the debt has been repaid in advance of the due date. However, if the interest is fixed for the whole or part of the term of the agreement, the lender is, provided a provision in this respect has been included in the relevant mortgage agreement, entitled to receive compensation from the borrower for the interest payable for the remaining part of the term. The Swedish consumer credit act includes detailed provisions as to how such compensation shall be calculated.

Derivative transactions

Nordea Hypotek has entered into derivative transactions with the parent bank Nordea Bank. The terms and conditions of the derivative agreements are such that they comply with the requirements in the regulations (the “Regulations”) issued by the Swedish Financial Supervisory Authority and the requirements of each rating agency that has assigned a rating to the covered bonds issued by Nordea Hypotek. For example, the bankruptcy of Nordea Hypotek does not constitute an event of default under the derivative transactions and Nordea Bank need to have a minimum rating as set out in the Regulations or the minimum rating prescribed by the relevant rating agencies to support the rating of the covered bonds.