Fitch Assigns RMS 20 Plc's Mortgage-Backed Notes Final Ratings.

LONDON -- Fitch Ratings, the international rating agency, has today assigned final ratings to Residential Mortgage Securities 20 Plc's multicurrency mortgage-backed floating-rate notes totaling GBP800 million, due as follows:

-- Class A1b US$150.40 million 'AAA';

-- Class A1c EUR376.35 million 'AAA';

-- Class A2a GBP260.60 million 'AAA';

-- Class A2c EUR176.40 million 'AAA';

-- Class M1a GBP25.50 million 'AA';

-- Class M1c EUR39.50 million 'AA';

-- Class M2a GBP14.25 million 'A';

-- Class M2c EUR23.15 million 'A';

-- Class B1a GBP11.50 million 'BBB';

-- Class B1c EUR21.65 million 'BBB';

-- Class B2a GBP18.00 million 'BB';

-- MERCS N.A. 'AAA'.

This transaction is a securitisation of residential mortgages originated and located in the UK and is the 20th in the series. Structurally, it sets a new precedent in that it includes a reverse turbo feature that has not been seen previously in the UK RMBS sector. This feature will come into effect once the required reserve fund balance is reached and maintained using excess spread to repay the Class B2a notes, which are assigned an expected rating of 'BB', substituting subordination with overcollateralisation as a form of credit enhancement for the more senior notes.

The expected ratings are based on the quality of the collateral, available credit enhancement, the underwriting criteria of Kensington Group plc (KG) and its subsidiaries, the primary servicing capabilities of Homeloan Management Ltd (HML, rated 'RPS2+ (subprime)UK') and the special servicing capabilities of Kensington Mortgages Ltd (a subsidiary of KG, rated 'RSS2+ (subprime)UK'), and the sound legal structure of the transaction.

Credit enhancement for the Class A1 and A2 notes totals 15.80% and will be provided by the subordination of the Class M1 (6.20%), Class M2 (3.56%), Class B1 (3.11%), Class B2 (2.12%), and an initial reserve fund representing 0.80% (GBP6.4 million) of the initial issue size. The reserve fund is expected to increase to a target amount of GBP9.92 million (equating to 1.24% of the initial issue size), funded from available excess spread.

To determine appropriate credit enhancement levels, Fitch analysed the collateral using its UK Residential Mortgage Default Model II. Fitch also modelled cash flows using the results of the default model with structural stresses, including various prepayment and interest-rate scenarios. The cash flow tests showed that each class of notes could withstand loan losses at a level corresponding to the related stress scenario without including any principal loss or interest shortfall and can retire principal by legal final maturity.

For further information, see the presale report 'Residential Mortgage Securities 20 plc,' available on the Fitch Ratings web site, 'www.fitchratings.com'.