OREANDA-NEWS. Fitch Ratings expects to assign the following ratings to the notes issued by MVW Owner Trust 2016-1:

--$230,570,000 class A timeshare loan-backed notes 'Asf'; Outlook Stable;

--$19,430,000 class B timeshare loan-backed notes 'BBBsf'; Outlook Stable.

KEY RATING DRIVERS

Improving Credit Quality: The strength of scored obligors is notably better than that of MVWOT 2015-1 with a weighted average (WA) Fair Isaac Corp. (FICO) score of 737, up from 726 in 2015-1, and is the highest since the 2009-2 transaction.

Decrease in Seasoning and Increase in Foreign Obligors: Although consistent with prior transactions, WA seasoning of 18 months and a foreign obligor concentration of 16.7% represent a shift from 43 months and 12.1% in 2015-1, respectively. While Fitch incorporated seasoning credit in its cumulative gross default (CGD) proxy derivation, an additive stress was also applied to account for potential weakness in the Latin American segment.

Presence of Prefunding Account: As with the prior MVWOT transactions, 2016-1 features a prefunding account that will hold up to 20% of the initial note balance after the closing date to purchase eligible timeshare loans. The transaction also allows for qualified substitutions of upgraded loans of up to 15% of the pool balance.

Sufficient Credit Enhancement: Initial hard credit enhancement (CE) for class A and B notes is 11.5% and 4%, respectively. Class A CE is down from 12.25% while class B is unchanged from 2015-1. Available CE is sufficient to support stressed multiples of Fitch's 'Asf' and 'BBBsf' CGD assumption of 10.5%.

Stabilizing Performance: With the exception of certain foreign segments, the 2010-2014 vintages display improved performance relative to the weaker 2007-2009 periods.

Quality of Origination/Servicing: MORI has demonstrated sufficient abilities as an originator and servicer of timeshare loans, as evidenced by the historical delinquency and default performance of securitized trusts and the managed portfolio.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of MVW would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults could produce CGD levels higher than the base case and would likely result in declines of CE and remaining default coverage levels available to the notes. Additionally, unanticipated increases in prepayment activity could also result in a decline in coverage. Decreased default coverage may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.

Thus, Fitch conducts sensitivity analysis by stressing both a transaction's initial base case CGD and prepayment assumptions by 1.5x and 2.0x and examining the rating implications on all classes of issued notes. The 1.5x and 2.0x increases of the base case CGD and prepayment assumptions represent moderate and severe stresses, respectively, and are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from Ernst & Young LLP. The third-party due diligence information was provided in Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to 254 sample loans. Fitch considered this information in its analysis and the findings did not have an impact on the agency's analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link at the end of this rating action commentary.

Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in the report titled 'MVW Owner Trust 2016-1 -- Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated May 31, 2016.