TEXT-Fitch takes rating action on AyT Caja Murcia I, II
Dec 5 - Fitch Ratings has affirmed four and downgraded two tranches of AyT Caja Murcia (Murcia) I and II, a Spanish RMBS series. The agency has also removed six tranches from Rating Watch Negative (RWN). A full list of rating actions is at the end of this commentary. The downgrades reflect Fitch's concern with the thin levels of credit enhancement available for the junior notes whilst the removal of the RWN is due to Fitch receiving loan modification data which has offset previous concerns over the credit profile of the underlying assets in the portfolio. The notes were placed on RWN in September 2012 due to the concerns over the extent of possible originator support. Despite the tough macroeconomic environment within Spain, the assets within these portfolios continued to perform well beyond Fitch's expectations. The agency had concerns that certain arrear management servicing strategies were being implemented or that the servicer had been resorting to loan modifications that would have led to a reclassification of assets to performing. As of October 2012, Murcia I had no reported defaults since close in December 2005, while Murcia II reported a single default with a subsequent 100% recovery since October 2006. The agency was provided with loan by loan level information involving borrowers that had been subject to loan modifications. The information shows that less than 2% of borrowers as a percentage of initial balance have been subject to initial modifications of original terms and conditions, i.e. reduction of margins and/or maturity extensions. This percentage is well below the limits allowed by the transaction documentation. The agency still believes that the originator has been offering financial support to borrowers via refinancing. This view is formed based on the fact that only one loan had been recognised as defaulted to date across the two transactions. Given the current macroeconomic environment and the tightening in liquidity on the market, in its analysis of the two transactions, Fitch did not give any credit to the originator continuing this practice and has assumed its standard default and recovery assumptions. Performance over the past 12 months from an arrears perspective has begun to deteriorate in both transactions in line with the trend seen in other Spanish RMBS transactions rated by Fitch. The portion of loans in arrears by more than three months is at 1.4% and 0.1% of the current outstanding balance in Murcia I and II respectively compared to 0.8% and 0.03% 12 months ago. With the continued adverse economic situation in Spain set to continue, Fitch believes that the credit enhancement for the junior notes is insufficient to withstand the agency's 'BBBsf' stresses. The downgrade of the class C notes for both Murcia I and II and the Negative Outlook across the structure reflect these concerns. The rating actions are as follows: AyT Caja Murcia Hipotecario I, FTA: Class A (ISIN ES0312282009): affirmed at 'AA-sf'; Outlook Negative: off RWN Class B (ISIN ES0312282017): affirmed at 'AA-sf'; Outlook Negative: off RWN Class C (ISIN ES0312282025): downgraded to 'BB+sf' from 'BBBsf'; Outlook Negative; off RWN AyT Caja Murcia Hipotecario II, FTA: Class A (ISIN ES0312272000): affirmed at 'AA-sf'; Outlook Negative: off RWN Class B (ISIN ES0312272018): affirmed at 'A+sf'; Outlook Negative: off RWN Class C (ISIN ES0312272026): downgraded to 'BB+sf' from 'BBBsf'; Outlook Negative; off RWN The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: Global Structured Finance Rating Criteria EMEA Residential Mortgage Loss Criteria EMEA Criteria Addendum - Spain - Mortgage and Cashflow Assumptions Counterparty Criteria for Structured Finance Transactions Counterparty Criteria for Structured Finance Transactions: Derivative Addendum
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