Fitch upgrades 23 tranches of 18 UK NC RMBS deals
Global rating agency Fitch has upgraded 23 tranches and affirmed all other tranches of 18 UK non-conforming RMBS series: Kensington Mortgage Securities (KMS), Money Partners Securities (MPS), Southern Pacific Financing (SPF), Southern Pacific Securities (SPS) and the Preferred series. The affirmations reflect the continued stable performance of all 18 transactions over the past year. Based on investor reports dated September 2012, loans in arrears by more than three months ranged between 20.1% (SPF05B) and 36.0% (SPS06-1). The high levels of arrears, particularly for the SPS series, suggests a weaker performance across the UK NC space. However, Fitch notes that the three-month arrears figures reported for the mortgage pools serviced by Acenden Limited (‘RPS2+’/’RSS2’) i.e. the SPF, SPS and Preferred series, takes into account of outstanding mortgage fees and charges independent of whether the borrower is current on its monthly mortgage payments.
The majority of transactions have deleveraged to less than one-third of their respective initial balances. Prepayment rates, although not as high as levels seen in pre-2010 periods, still average about 5% to 10% for most transactions. This enables the notes, particularly the senior tranches, to benefit from a steady build-up in credit enhancement. As a result, Fitch has upgraded a number of senior tranches including Class B1a of Preferred 05-1, Class B of Preferred 8, Class C of SPS05-1 and SPS05-2, Class B of SPS05-3 and Class B1c of SPS06-1 to ‘AAAsf’ from ‘AAsf’. These tranches currently have credit enhancement levels of approximately 40% or more and are expected to build up further given the sequential amortisation of the notes. Some mezzanine and junior tranches have also been upgraded due to sufficient levels of credit support, combined with the stable performance and fully funded reserve funds that are no longer permitted to amortise or expected to be drawn in the near future. Additionally, the uncollateralised tranche of Preferred 06-1, Class FTc, has been upgraded to ‘CCCsf’ from ‘CCsf’ as it has begun amortising following the full redemption of Class ETc last quarter.