OREANDA-NEWS. Fitch Ratings has affirmed the 'A-sf' and 'AAA(mex)vra' ratings of Fovissste TFOVIE 12U residential mortgage backed securities (RMBS). A full list of rating actions follows at the end of this ratings action commentary.

KEY RATING DRIVERS

Adequate Performance: Credit enhancement (CE) remains high and consistent. As of June 2016, overcollateralization is 53.2%; and when available cash reserves are taken into account, total CE reaches 59.1%. Excess spread is positive and stable at 2.4% during the last twelve months. Also, available liquidity is sustained at reasonable levels and covers at least the next two interest and principal scheduled payments. Fitch expects the transaction to maintain these indicators in the foreseeable future.

Loan Delinquencies Remain Low: As of May 2016, the ratios of +90 days delinquent loans (over original balance) and +180 days delinquent loans were 4.2% and 3.2%, respectively. Both ratios have been stable since the closing date, reflecting adequate borrower characteristics of public sector workers and the efficiency of a payroll deductible collection mechanism used by Fovissste. Concentration risk is moderate in Fitch's view as loans attributed to the top three Dependencias (employers) is equivalent to 17.7% of collateral balance and the securitized portfolio is pulverized in 26,139 mortgage loans.

Financial Structure: The financial structure of TFOVIE 12U features a single waterfall for collections and payments. Unlike traditional TFOVIS-RMBS, this transaction has a quarterly scheduled amortization scheme with a legal final maturity date of December 2024; however, rated notes are expected to be fully paid in December 2021; after this date, the transaction amortizes in a full-turbo scheme. Net interest and principal payments coverage ratio (on each quarterly payment date) remains ample at 9.4x and 1.5x, respectively for the last twelve months. As of June 2016, the TFOVIE 12U balance is equivalent to approximately 41% of their initial issuance amount. Fitch expects to observe a consistent amortization pace.

Consistent Servicing Activities: TFOVIE 12U are backed by a closed pool of mortgage loans originated by Fovissste (a federal institute created in 1972 with the purpose of providing social benefits to registered workers of the federal and state public sector in Mexico). Fovissste's servicing abilities are perceived as good by Fitch. Fovissste is the primary servicer of this transaction and collects the securitized loans via a payroll deduction mechanism that adequately mitigates willingness to pay. Payment to income is set at 30% of the borrower monthly income, and by law, employers contribute an additional 5% of such income that is directed to amortize the mortgage loans. Additionally, Fovissste has the ability to advance pending collections caused by delays of Dependencias. Administradora de Activos Financieros S. A. (Acfin) acts as a master servicer.

RATING SENSITIVITIES

A downgrade to the notes could be triggered by negative trends in CE formation related to sharp increases in delinquencies or a cash reserve below its minimum level. In addition, unexpected operational risk at Fovissste that lead to cash flows disruptions to the trusts could also trigger negative rating actions on both (international and national scale) ratings. The Long-Term Local-Currency rating is sensitive to rating actions taken on the sovereign.

DUE DILIGENCE USAGE

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

Fitch has affirmed the following ratings:

--TFOVIE 12U Notes due 2024 at 'A-sf' and 'AAA(mex)vra'.

The Rating Outlook is Stable.