OREANDA-NEWS. Fitch Ratings has affirmed Grecale RMBS 2011 S. r.l. (Grecale 2011) and Grecale RMBS 2015 S. r.l. (Grecale 2015) as follows:

Grecale 2011:

Class A2 (ISIN IT0004764251): affirmed at 'AA+sf'; Outlook Stable

Grecale 2015:

Class A (ISIN IT0005143836): affirmed at 'AA+sf'; Outlook Stable

Class B (ISIN IT0005143844): affirmed at 'Asf'; Outlook Stable

Class C (ISIN IT0005143851): affirmed at 'BBB+sf'; Outlook Stable

The transactions are securitisations of residential mortgage loans originated and serviced by Unipol Banca S. p.A. (BB/Stable/B). A portion of loans in Grecale 2015 (17.5% at closing) was originated by Banca SAI S. p.A. before it merged into Unipol Banca in 2014.

KEY RATING DRIVERS

Adequate Credit Support

Credit enhancement (CE) available to Grecale 2011 has continued to accrue over the past year and is currently 39.4%, compared with 32.5% as of March 2015. The main driver of the increase is the steady collateral repayment, at an annualised principal payment rate of 17.3%. The current notes balance is lower than the collateral balance, suggesting some CE comes from over-collateralisation thanks to full trapping of excess spread in the structure.

CE available to Grecale 2015's senior notes has increased slightly to 26.6% from 23.4%. It has remained stable at around 15.5% for the class B notes and around 11.4% for the class C notes, since closing in November 2015. Fitch's analysis shows that the available credit support is sufficient to withstand the stresses associated with the ratings.

Asset Performance Within Expectations

The asset performance of Grecale 2011 has remained volatile over the past year, but within Fitch's expectations set at closing. The pipeline of defaulted loans (defined as loans with more than six monthly instalments overdue) has increased to 4.7% of the initial pool, in line with the Italian RMBS default index, from 3.7% in March 2015. The portion of late stage arrears (loans with three or more monthly instalments overdue) has increased to 1.2% of the current pool from 0.9% in March 2015. Arrears are mainly driven by self-employed borrowers and atypical/seasonal workers, as well as liquidity loans.

Grecale 2015, which only closed in November 2015, has not recorded any defaults so far (defined as loans with at least 12 unpaid monthly instalments, or at least four unpaid quarterly instalments or at least two unpaid semi-annual instalments overdue). Late stage arrears stand at 0.30%.

Missing Data

Fitch made conservative assumptions about missing portfolio characteristics in the latest loan by loan data. The agency applied a foreclosure frequency hit of 1.5 to all the loans with missing loan purpose and/or missing borrower employment information. For Grecale 2015, data on second homes was taken from closing.

Payment Holidays and Maturity Extensions

Fitch did not receive any information about payment holidays and maturity extensions. The agency assumed that, in line with the market data, about 5% of the current pool in Grecale 2011 is on payment holidays or has extended the tenor. As these borrowers have a weaker credit profile, the agency increased the probability of default associated with them, in line with that applied to loans in late stage arrears. This adjustment had no impact on the ratings.

Commingling Risk

As no commingling reserve is available and collections are concentrated in the last days of each month, in testing the adequacy of the credit support for the rated notes, Fitch reduced the available CE by the estimated one-month commingling loss. The notes' ratings were found to be resilient to this stress.

Recovery Rate Cap

Fitch capped the maximum recovery rates at 100% of the outstanding defaulted balance despite the relatively low current loan to value ratios of the loans. This assumption reflects lengthy recovery timing typical of Italy. The CE available to the notes was deemed sufficient to withstand such stresses, as reflected in the rating actions.

RATING SENSITIVITIES

Changes to Italy's Long-term Issuer Default Rating (BBB+/Stable) and the rating cap for Italian structured finance transactions, currently 'AA+sf', could trigger rating changes on the class A notes of the two transactions.

Deterioration in asset performance beyond Fitch's expectations would also trigger negative rating action.

An abrupt increase in reference interest rates would harm borrowers with constant instalment/variable maturity loans and loans originated after 2008, under low interest rates, without structural protection.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Applicable to Grecale 2011: Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Applicable to Grecale 2015: Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated errors or missing data related to the property value information. These findings were not considered in this analysis as they are immaterial.

Prior to the transactions' closing, Fitch conducted a review of a small targeted sample of the originators' origination files and found the information contained in the reviewed files to be adequately consistent with the originators' policies and practices and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis.

- Loan-by-loan data provided by the European Data Warehouse as at March 2016

- Transaction reporting provided by Unipol Banca as at April 2016 and June 2016