Clarification of ETV calculation for mortgages securing more than one exposure

Article 124 paragraph 6 Regulation (EU) No 575/2013 (CRR) specifies the calculation of ETV for IPRE exposures. In order to calculate ETV, the gross value of an exposure should be divided by the value of property. Additionally, this article clarifies that: “For the purposes of the first subparagraph, point (a), where an institution has more than one exposure secured by the same immovable property and those exposures are secured by liens on that immovable property that are sequential in ranking order without any lien held by a third party ranking in-between, the exposures shall be treated as a single combined exposure and the gross exposure amounts for the individual exposures shall be summed up to calculate the gross exposure amount for the single combined exposure.” Our question refers to calculation ETV for joint mortgages – so the mortgage which secures more than one exposures and additionally these exposures may have other mortgages assigned. Based on the above, it’s clear that numerator should include the gross value of all exposures secured by this joint mortgage. Nevertheless, it’s unclear which value should be used in the denominator of ETV in the real life example described below.

We have real life example – 2 exposures:  Exposure A with original exposure value 15 000 000 Exposure B with original exposure value 18 000 000 Additionally, we have two collaterals:  Property Y, which is commercial income-producing property (IPRE property) and secures both exposures A and B Property X, which is just non-IPRE, residential property (let’s assume this is the flat of the counterparty) and secures only the exposure A. The market values of these properties are as follows: Property Y: 39 000 000 Property X: 17 000 000   The values of mortgages registration are as follows: Property Y joint mortgage for exposure A: 24 000 000 Property Y joint mortgage for exposure B: 37 000 000 Property X for exposure A: 24 000 000   Based on the above example we understand that in the numerator of ETV for both exposures A and B, we should assume the sum of gross value for exposures A and B, so 15 000 000 + 18 000 000. However, we aren’t sure which value should be calculated in the denominator of ETV for exposure A and B – that’s why we have questions: Should the values of properties in the denominator of ETV be capped to the value of mortgage registration or not? Let’s assume for the purpose of this question, that we don’t have to cap the property value to the mortgage registration value in the ETV denominator.  Then, the denominator of ETV value for exposure A should be calculated as the sum of all market values of properties X and Y – that means 17 000 000 + 39 000 000 - or the sum of values of property X and the part of property Y – that means – 17 000 000 + 22 000 000 (let’s assume that this is the value of property Y assigned to the exposure A)? Then, the denominator of ETV value for exposure B should be calculated as the sum of all market values of properties X and Y – that means 17 000 000 + 39 000 000 - or the sum of values of property X and the part of property Y – that means – 17 000 000 + 17 000 000 (let’s assume that this is the value of property Y assigned to the exposure B) – or only the part of value of property Y 17 000 000 (let’s assume that this is the value of property Y assigned to the exposure B)? If property X is non-IPRE and it’s just regular, residential property – let’s assume this is the flat of a counterparty – should it be used in the calculation of ETV for IPRE exposures?