New transparency requirements came into force for the latest quarter’s Section 28 reporting from Germany’s Pfandbrief issuers, which the vdp has delivered in a new file format. However, among the new data being reported a mistake was spotted in Deutsche Hypo’s figures.

Under a 2013 amendment to the Pfandbrief Act, the reporting requirements for German Pfandbrief issuers were enhanced, notably with the addition of a field providing loan-to-value (LTV) information, although – in line with the German industry’s mortgage lending value (MLV) concept – it reports weighted loan-to-MLV figures. The mortgage lending value is intended to capture a property’s long term sustainable value and research published by Fitch earlier this year showed that its use provides an extra cushion for investors since on average MLVs are 12% lower than respective market values.

As a consequence of Germany’s Pfandbrief legislation the weighted average loan-to-MLV cannot exceed 60%. However, Deutsche Hypothekenbank initially reported a figure of 78.71% in its latest Section 28 report and this was quickly picked up on.

“They published 78% as an average, which is technically not possible,” said Michael Schulz, head of fixed income research at NordLB, “and I got a lot of phone calls regarding this very high number from some big asset managers.”

The issuer was alerted to its mistake and the loan-to-MLV figure has been corrected on its website to 57.25%.

“It is not only the mistake that is interesting,” added Schulz, “but also how people are very much looking at the details.”

A market participant said that it was not surprising for there to have been a minor issue given the transition to the new reporting requirements and he noted that it had been dealt with quickly.

The Association of German Pfandbrief Banks (vdp) publishes its members’ Section 28 information on its website alongside aggregated figures and for the first time it has published the data in XML format alongside the more typical PDF, Excel and CSV files. The web-friendly XML format is already used by some in securitisation markets and is a further step towards improving transparency in the covered bond market in a practical way.

“Analysts asked for this format, and for us it is something of a test,” said Swen Prilla, capital markets specialist at the vdp. “We will see how often it is used and downloaded to judge the interest from analysts and investors.”