Fitch af­firms 4 UK Prime RMBS

The Pak Banker - - COMPANIES/BOSS -

Global rat­ing agency Fitch has af­firmed four UK prime RMBS trans­ac­tions: Brass No.1 Plc (Brass 1), Brass No.2 Plc (Brass 2), Brunel Res­i­den­tial Mort­gages Se­cu­ri­ti­sa­tion No.1 plc (Brunel 1) and Fri­ary No.1 plc (Fri­ary 1). A full list of rat­ing ac­tions is be­low.

The un­der­ly­ing mort­gages in Brass 1 and Brass 2 were orig­i­nated by Ac­cord Mort­gages Lim­ited, a wholly owned sub­sidiary of York­shire Build­ing So­ci­ety ('BBB+'/Sta­ble/'F2'). Brunel 1 is backed by mort­gages orig­i­nated by Bris­tol & West, which is a sub­sidiary of Bank of Ire­land (BOI, 'BBB'/Sta­ble/'F2') whilst Fri­ary 1 is col­lat­er­alised by mort­gages orig­i­nated by Prin­ci­pal­ity Build­ing So­ci­ety.

The vol­ume of loans in ar­rears by three months or more has re­mained rel­a­tively low in Brass 1, Brunel and Fri­ary; stand­ing at 0.3%, 1.5% and 0.5% of their re­spec­tive cur­rent pool bal­ances. Only one in­ter­est pay­ment date has passed since Brass 2 closed in Oc­to­ber 2012 and no loans have been re­ported as be­ing in three-months plus ar­rears or de­faulted.

Ad­di­tion­ally, lim­ited num­bers of loans have been taken into pos­ses­sion, with 0%, 0.3% and 1% of the ini­tial col­lat­eral bal­ances re­ported for Brass 1, Fri­ary and Brunel. Given the low pipe­line of loans in late stage ar­rears, as well as the cur­rent stock of un­sold pos­ses­sions in all four trans­ac­tions, Fitch ex­pects the lev­els of de­faults and sub­se­quent losses as­so­ci­ated with the sale of prop­er­ties in pos­ses­sion to re­main lim­ited, if any, in the near fu­ture.

Fri­ary 1, Brass 1 and Brass 2 are cur­rently paying down se­quen­tially with no pro-rata mech­a­nism avail­able within the struc­ture. Fri­ary 1, Brunel 1 and Brass 1 also in­clude fully funded re­serve funds that are not per­mit­ted to amor­tise. Both features will con­trib­ute to­wards the steady build-up in credit sup­port avail­able in all three trans­ac­tions.

Fitch be­lieves that bor­rower af­ford­abil­ity con­tin­ues to be sup­ported by the pre­vail­ing en­vi­ron­ment of low in­ter­est rates. Hence, even a mod­est rise in in­ter­est rates, ex­pected to take place at the start of 2014, will likely trig­ger an in­crease in ar­rears and sub­se­quent de­faults.

The an­tic­i­pated mar­gin rise in Bris­tol and West's tracker prod­ucts, pre­dom­i­nantly on its buy-to-let (BTL) mort­gages to 4.49% on 1 May, will po­ten­tially af­fect bor­row­ers in the Brunel trans­ac­tion, presently com­pris­ing 57.6% of BTL track­ers.

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