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Fitch Affirms 8 UK Non-Conforming RMBS Transactions.

London: Fitch Ratings has affirmed all tranches of the Preferred Residential Securities (PRS) RMBS series and four Residential Mortgage Securities (RMS) transactions. The transactions are comprised of UK non-conforming residential mortgages. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Stable Asset Performance

The asset performance has remained stable over the past 12 months with signs of arrears levels decreasing throughout 2015 across all transactions. In Fitch's opinion, this is mainly a result of the continued low interest rate environment, which is supporting borrower affordability.

With regards to the PRS series, in terms of three month plus arrears, the PRS transactions averaged around 20% of the outstanding pool balance over the course of 2015. RMS 26 has been the strongest performer with three month plus arrears over the past year averaging around 3%. This is mainly due to the fact that the pool was seasoned at around 77 months when the transaction closed. RMS 20 has been the weakest performer, with three month plus arrears averaging 19%. The Fitch UK Non-Conforming Index has averaged around 10% over the same period.

Credit Enhancement (CE) Build-Up

All PRS transactions continue to pay down sequentially due to pro-rata amortisation trigger breaches. Coupled with non-amortising reserve funds, this has allowed a continued build up in CE for the rated notes. After conducting its analysis, Fitch concluded that CE was sufficient enough to withstand higher rating stresses resulting in the affirmations.

RMS 26 pays down sequentially and as such, this has allowed a continued build up in CE. All other RMS transactions are currently paying down pro rata due to the arrears triggers reversing and so long as this trigger remains performing, future CE build-up will be limited. However, after conducting its analysis, Fitch concluded that CE was sufficient enough to withstand higher rating stresses resulting in affirmations.

Standard Variable Loans (SVR) Risks Modelled

The majority of the assets are linked to SVR. In line with its criteria, Fitch has applied a haircut to the available excess spread in the transactions. The analysis showed that even with reduced excess spread, the current credit enhancement was sufficient to withstand the stress.

Counterparty Remedial Action

Deutsche Bank AG (DB) (A-/F1) is the interest rate swap provider on RMS 26. Following the downgrade of its long-term rating to 'A-' in December 2015, Fitch understands from Kensington Mortgage Company that DB has been posting collateral at the account bank in line with Fitch's criteria, as defined in the Credit Support Annex. As such, DB remains eligible to support 'AAAsf' note ratings in RMS 26.

RATING SENSITIVITIES

Interest Rate Environment

In Fitch's opinion, borrower affordability is being supported by the low interest rate environment. This is evidenced by declining three month plus arrears balances across the transactions. However, low constant prepayment rates suggest that borrowers have been unable to refinance, leaving performance of the pools highly sensitive to future interest increases.

Tail Risk

PRS 05-1, PRS 05-2 and PRS 8 have fewer than 700 borrowers remaining in their pools. The small borrower count could lead to a de-stabilisation in pool performance limiting any future upgrades.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

RMS 26

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Overall and together with the assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The following information below was used in the analysis:

--Loan-by-loan data provided by Acenden as at 30 November 2015

--Transaction reporting provided by Acenden as at 14 December 2015

--Loan enforcement details provided by Acenden as at 14 December 2015

--Loan-by-loan data provided by Kensington Mortgages Limited as at 31 October 2015

--Transaction reporting provided by Kensington Mortgages Limited as at 22 February 2016

--Loan enforcement details provided by Kensington Mortgages Limited as at 31 January

--Collateral posting information provided by Kensington Mortgages Limited as at 22 March 2016

MODELS A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Residential Mortgage Securities 26 Plc - Appendix, dated 4 October 2012 at www.fitchratings.com). In addition refer to the special report: "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website."

Fitch has taken the following rating actions:

Preferred Residential Securities 05-1 PLC

Class B1a (ISIN XS0217637213): affirmed at 'AAAsf'; Outlook Stable

Class B1c (ISIN XS0217069813): affirmed at 'AAAsf'; Outlook Stable

Class C1c (ISIN XS0217070076): affirmed at 'AAAsf'; Outlook Stable

Class D1c (ISIN XS0217070829): affirmed at 'BBBsf'; Off RWP; Outlook Stable

Class E (ISIN XS0217071041): affirmed at 'Bsf'; Off RWP; Outlook Stable.

Preferred Residential Securities 05-2 PLC

Class A2a (ISIN XS0234203684): affirmed at 'AAAsf'; Outlook Stable

Class A2c (ISIN XS0234204732): affirmed at 'AAAsf'; Outlook Stable

Class B1a (ISIN XS0234207594): affirmed at 'AAAsf'; Outlook Stable

Class B1c (ISIN XS0234208485): affirmed at 'AAAsf'; Outlook Stable

Class C1a (ISIN XS0234209020): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class C1c (ISIN XS0234209459): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class D1c (ISIN XS0234212594): affirmed at 'BBsf'; Off RWP; Outlook Stable

Class E1c (ISIN XS0234213642): affirmed at 'Bsf'; Off RWP; Outlook Stable.

Preferred Residential Securities 06-1 PLC

Class A2a (ISIN XS0243656625): affirmed at 'AAAsf'; Outlook Stable

Class A2b (ISIN XS0243704532): affirmed at 'AAAsf'; Outlook Stable

Class A2c (ISIN XS0243663837): affirmed at 'AAAsf'; Outlook Stable

Class B1a (ISIN XS0243655577): affirmed at 'AAAsf'; Outlook Stable

Class B1c (ISIN XS0243665022): affirmed at 'AAAsf'; Outlook Stable

Class C1a (ISIN XS0243658670): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class C1c (ISIN XS0243665964): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class D1a (ISIN XS0243659728): affirmed at 'BBsf'; Off RWP; Outlook Stable

Class D1c (ISIN XS0243666939): affirmed at 'BBsf'; Outlook Stable

Class E1c (ISIN XS0243669529): affirmed at 'Bsf'; Off RWP; Outlook Stable

Class FTc (ISIN XS0243675336): affirmed at 'CCCsf'; Off RWP; Recovery Estimate (RE) 75%.

Preferred Residential Securities 8 PLC

Class A1a1 (ISIN XS0198309691): affirmed at 'AAAsf'; Outlook Stable

Class A1a2 (ISIN XS0198313024): affirmed at 'AAAsf'; Outlook Stable

Class A1b (ISIN XS0198313610): affirmed at 'AAAsf'; Outlook Stable

Class A1c (ISIN XS0198318171): affirmed at 'AAAsf'; Outlook Stable

Class B1a (ISIN XS0198318411): affirmed at 'AAAsf'; Outlook Stable

Class B1c (ISIN XS0198318841): affirmed at 'AAAsf'; Outlook Stable

Class C1a (ISIN XS0198319062): affirmed at 'AAAsf'; Outlook Stable

Class C1c (ISIN XS0198319229): affirmed at 'AAAsf'; Outlook Stable

Class D1a (ISIN XS0198319575): affirmed at 'Asf'; Off RWP; Outlook Stable

Class D1c (ISIN XS0198319906): affirmed at 'Asf'; Off RWP; Outlook Stable

Class E (ISIN XS0198320409): affirmed at 'Asf'; Outlook Stable.

Residential Mortgage Securities 20 Plc (RMS 20)

Class A2a (ISIN XS0213175788): affirmed at 'AAAsf'; Outlook Stable

Class A2c (ISIN XS0213176596): affirmed at 'AAAsf'; Outlook Stable

Class M1a (ISIN XS0213177214): affirmed at 'AAAsf'; Outlook Stable

Class M1c (ISIN XS0213178022): affirmed at 'AAAsf'; Outlook Stable

Class M2a (ISIN XS0213178709): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class M2c (ISIN XS0213179343): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class B1a (ISIN XS0213180432): affirmed at 'BBBsf'; Off RWP; Outlook Stable

Class B1c (ISIN XS0213180945): affirmed at 'BBBsf'; Off RWP; Outlook Stable.

Residential Mortgage Securities 21 Plc (RMS 21)

Class A3a (ISIN US76112VBD73): affirmed at 'AAAsf'; Outlook Stable

Class A3c (ISIN US76112VBF22): affirmed at 'AAAsf'; Outlook Stable

Class M1a (ISIN US76112VAG14): affirmed at 'AAAsf'; Outlook Stable

Class M1c (ISIN US76112VAH96): affirmed at 'AAAsf'; Outlook Stable

Class M2a (ISIN US76112VAJ52): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class M2c (ISIN US76112VAK26): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class B1a (ISIN US76112VAL09): affirmed at 'Asf'; Off RWP; Outlook Stable

Class B1c (ISIN US76112VAM81): affirmed at 'Asf'; Off RWP; Outlook Stable

Class B2a (ISIN US76112VAN64): affirmed at 'BBBsf'; Off RWP; Outlook Stable.

Residential Mortgage Securities 22 Plc (RMS 22)

Class A3a (ISIN XS0259417565): affirmed at 'AAAsf'; Outlook Stable

Class A3c (ISIN XS0259418290): affirmed at 'AAAsf'; Outlook Stable

Class M1a (ISIN XS0259418456): affirmed at 'AAAsf'; Outlook Stable

Class M1c (ISIN XS0259418530): affirmed at 'AAAsf'; Outlook Stable

Class M2a (ISIN XS0259418704): affirmed at 'AAsf'; Off RWP; Outlook Stable.

Class M2c (ISIN XS0259418969): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class B1a (ISIN XS0259419264): affirmed at 'BBBsf'; Off RWP; Outlook Stable

Class B1c (ISIN XS0259419421): affirmed at 'BBBsf'; Off RWP; Outlook Stable

Class B2 (ISIN XS0259419777): affirmed at 'BBsf'; Off RWP; Outlook Stable; RE NC - the RE has been removed due to a previous error. The correction is applicable as of 12 August 2013.

Residential Mortgage Securities 26 plc (RMS 26)

Class A1 (ISIN XS0825706673): affirmed at 'AAAsf'; Outlook Stable

Class M1 (ISIN XS0825706913): affirmed at 'AAsf'; Off RWP; Outlook Stable

Class M2 (ISIN XS0825707218): affirmed at 'Asf'; Off RWP; Outlook Stable

Class B1 (ISIN XS0825707564): affirmed at 'BBBsf'; Off RWP; Outlook Stable

Class B2 (ISIN XS0825707648): affirmed at 'BBsf'; Off RWP; Outlook Stable.
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Geographic Code:4EUUK
Date:Apr 9, 2016
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