November 30, 2012 / 4:21 PM / 5 years ago

TEXT-Fitch affirms HOMES

Nov 30 - Fitch Ratings has affirmed Home Obligors Mortgage Enhanced
Securities Series 1 (Pty) Ltd (Homes), as follows:

ZAR 431.3m Class B2 notes: affirmed at 'AAA(zaf)'; Outlook Stable
ZAR 386.4m Class B3 notes: affirmed at 'AAA(zaf)'; Outlook Stable
ZAR 141.0m Class B5 notes: affirmed at 'AAA(zaf)'; Outlook Stable
ZAR 28.3m Class B6 notes: affirmed at 'AAA(zaf)'; Outlook Stable
ZAR 1,569m Class B7 notes: affirmed at 'AAA(zaf)'; Outlook Stable
ZAR 320m Class B8 notes: affirmed at 'AAA(zaf)'; Outlook Stable
ZAR 40m Class B9 notes: affirmed at 'AAA(zaf)'; Outlook Stable
ZAR 130m Class C2 notes: affirmed at 'AA(zaf)'; Outlook Stable
ZAR 184m Class C3 notes: affirmed at 'AA(zaf)'; Outlook Stable
ZAR 30m Class C4 notes: affirmed at 'AA(zaf)'; Outlook Stable
ZAR 30m Class C5 notes: affirmed at 'AA(zaf)'; Outlook Stable
ZAR 73m Class D2 notes: affirmed at 'A(zaf)'; Outlook Stable
ZAR 70m Class D3 notes: affirmed at 'A(zaf)'; Outlook Stable
ZAR 22m Class D4 notes: affirmed at 'A(zaf)'; Outlook Stable
ZAR 18m Class D5 notes: affirmed at 'A(zaf)'; Outlook Stable
ZAR 41m Class E2 notes: affirmed at 'BBB(zaf)'; Outlook Stable
ZAR 46m Class E3 notes: affirmed at 'BBB(zaf)'; Outlook Stable
ZAR 29m Class E4 notes: affirmed at 'BBB(zaf)'; Outlook Stable
ZAR 19m Class F2 notes: affirmed at 'BBB(zaf)'; Outlook Stable
ZAR 18m Class G2 notes: affirmed at 'BBB(zaf)'; Outlook Stable

The affirmation follows the satisfactory annual review and reflects the large
credit enhancement (CE) and structural protection supporting the notes. For its
review, Fitch applied its South African RMBS criteria, last updated in March
2012. CE is provided by overcollateralisation and note subordination, and as of
August 2012 totalled 36.9% for the class B (most senior) notes, 29.1% for the
class C notes, 25.2% for the class D notes, 22.8% for the class E notes, 22.4%
for the class F notes and 22.0% for the class G notes. In addition, the
transaction features significant overcollateralisation of interest, resulting
from the junior position in the priority of payments of the interest payable
under the subordinated loan, which represents 19.2% of the transaction's

The transaction's performance has been solid, with arrears lower than the
average of South African issuers. However, it has been supported by ABSA Bank
Limited's (ABSA, 'A-/Stable/'F2'; 'AA+(zaf)'/Stable/'F1+(zaf)') repurchase of
distressed loans, for a cumulative 5.20% of the transaction closing balance to
date; the most recent repurchase was performed in May 2012 and cleared the
transaction of most of its delinquent loans.

A number of notes across all classes reached their scheduled maturity date on 19
July and, as such, are currently paid down with principal portfolio collections.
In Fitch's view, the repayment of the matured junior notes ahead of non-matured
senior ones will not erode the notes' CE. This is because the subordinated loan
is not to be repaid or any principal collections to be released until the full
redemption of the notes. Principal collections may still be used to purchase new
loans once the matured notes are fully redeemed.
The transaction is also supported by the redraw and liquidity facilities
provided by FirstRand Bank Limited (FirstRand, 'BBB+/F2/Negative',
'AA(zaf)/Stable/'F1+(zaf)'), which represent 0.5% and 4.5% of the outstanding
note and subordinated loan balances.

In the context of its review Fitch was provided with updated legal opinions,
relating in particular to the compliance of the mortgage loans to the National
Credit Act (NCA) and Consumer Protection Act (CPA). The legal opinions indicated
that number of clauses in the documentation of the mortgage loans were
potentially in breach of these regulations arising from, most noticeably, rights
given to the lender to step in outside the context of a borrower default, or the
exclusion of the bank's liability for gross negligence. According to the legal
opinion, these contraventions might result in the imposition of fines, claims
for damages or the severance of provisions, while the agreements of around 9.6%
of the loan portfolio might in theory be ruled as invalid by a court.

Fitch has taken the view that in practice, given the nature of the breaches any
court ruling on these matters should have only limited adverse consequences,
with loan invalidity as the most unlikely outcome. However, no relevant case law
exists on the matter and legal opinions express no particular view as to the
severity of observed contraventions to the CPA. The affirmation of the notes
reflects this legal uncertainty as the asset performance could otherwise have
justified an upgrade for some of the junior notes.

Homes is a securitisation of South African mortgage loans originated by ABSA
closed in August 2007. The transaction features an "evergreen" revolving period,
meaning that the principal portfolio collections can be used to purchase new
loans for as long as certain conditions are fulfilled regarding the performance
of the portfolio and provided that no outstanding note has reached its scheduled

Additional information is available at The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

In its analysis of the transaction Fitch used information extracted from
investor reports as well as information provided by ABSA, either in the context
of the update of the agency's criteria, or for the purpose of this surveillance
review more specifically.

Applicable criteria, "EMEA RMBS Master Rating Criteria" dated 7 June 2012 and
"EMEA Criteria Addendum - South Africa", dated 2 March 2012 are available at

Applicable Criteria and Related Research:
EMEA RMBS Master Rating Criteria
EMEA Criteria Addendum - South Africa - Mortgage and Cashflow Assumptions

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