The FINANCIAL — London-05 September 2011: Fitch Ratings has affirmed eight tranches of Farringdon Mortgages Plc (Farringdon) 1 and 2, a series of UK non-conforming RMBS transactions.
The affirmations reflect the stable performance of the underlying collateral, the low current stock of repossessed properties and the sufficient level of credit enhancement available to the notes. The Farringdon series comprises residential mortgage loans originated solely by Rooftop Mortgages Limited. The portfolios are highly deleveraged with remaining note principal of 14.8% in Farringdon 1 and 23.6% in Farringdon 2.
Arrear levels have stabilised as the loans, which are all linked to three-month LIBOR have benefited from the current low rates. In July 2011, the volume of loans in arrears by more than three months (excluding repossessions) was 14.8% for Farringdon 1 and 20.01% for Farringdon 2, compared with peaks of 24.2% and 25.6% in Q309, respectively.
Subsequently, repossession activities have remained low over the past few interest payment dates. The number of repossessed properties sold in the past year has exceeded the number of newly repossessed assets, enabling a decrease in the volume of unsold repossessions. As of July 2011, Farringdon 1 had repossessed properties of only GBP476,580 (2.7% of the current pool) whilst in Farringdon 2 this balance stood at GBP86,527, (0.18% of the current portfolio balance). The low volume of repossessed properties is expected to limit losses, which should be covered by the reserve funds and will subsequently allow the reserve funds to steadily replenish with available gross excess spread. In Fitch's view, replenishment of the reserve funds will increase the credit enhancement available in these deals. As of July 2011, Farringdon 1's cash reserve fund was at 51.5% of its target amount and Farringdon 2'scash reserve fund was at 51.8%.
At present, Fitch does not expect that the performance will deteriorate to levels that would threaten the ratings of the notes. As a result, the ratings of the notes have been affirmed. As the portfolio has deleveraged to such low levels, the agency recognises that delinquency of a few loans could lead to a significant jump in arrears. Fitch will continue to monitor the performance of this deal and take rating actions as it deems necessary.
The rating actions are as follows:
Farringdon Mortgages No. 1 Plc (Farringdon 1):
Class M2a (ISIN XS0211300362) affirmed at 'AAAsf', Outlook Stable
Class B1a (ISIN XS0211301766) affirmed at 'AAsf', Outlook Stable
Class B2a (ISIN XS0211303382) affirmed at 'BBsf', Outlook Stable
Farringdon Mortgages No. 2 Plc (Farringdon 2):
Class A2a (ISIN XS0228709985) affirmed at 'AAAsf'; Outlook Stable
Class A2a DAC (ISIN XS0228710561) affirmed at 'AAAsf'; Outlook Stable
Class M2a (ISIN XS0228711882) affirmed at 'AAsf'; Outlook Stable
Class B1a (ISIN XS0228712260) affirmed at 'BBBsf'; Outlook Stable
Class B2a (ISIN XS0228712930) affirmed at 'Bsf'; Outlook Stable
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