OREANDA-NEWS. Fitch Ratings has affirmed the Brass prime RMBS series, as follows:

Brass No. 1 Plc (Brass 1)
Class A (ISIN XS0615237236): affirmed at 'AAAsf'; Outlook Stable

Brass No. 2 Plc (Brass 2)
Class A2 (ISIN XS 0832874464): affirmed at 'AAAsf'; Outlook Stable

Brass No. 3 Plc (Brass 3)
Class A1 (ISIN XS 0976123587): affirmed at 'AAAsf'; Outlook Stable

The underlying mortgages in the series were originated by Accord Mortgages Limited, a wholly owned subsidiary of Yorkshire Building Society (A-/Stable/F1).

KEY RATING DRIVERS
Solid Asset Performance
All three transactions have reported solid asset performance since closing, with low three-months plus arrears levels ranging between 10bp (Brass 3) and 70bp (Brass 1) of their respective collateral balances.

To date, only six properties have been taken into possession, none of which belong to the Brass 3 portfolio.

The limited volume of late-stage arrears and properties in possession, have led to the expectation of negligible losses in the three portfolios in 2015.

SVR Risks Modelled
The transactions' underlying portfolios consist of fixed-rate loans, tracker loans and standard variable rate (SVR) loans. At the end of the teaser period, the fixed-rate and tracker loans will revert to the SVR set by Accord, currently 5.79% (the highest among prime lenders in the UK). Fitch has therefore factored in a potential payment shock to borrowers reverting to SVR by adjusting upwards the underwriting hit.

The three transactions are hedged against basis risk between LIBOR-linked notes and both fixed-rate and SVR- and BBR-linked mortgages. Fitch's analysis of SVR portfolios does not give credit to such hedging arrangements, as they are deemed difficult to replace. For this reason, the transactions were analysed as unhedged against the ultimate exposure to basis risk between SVR and LIBOR. Fitch reduced the excess spread generated by all three transactions. The corresponding reduction in excess spread has had no impact on the notes' ratings.

High Prepayments Increase Credit Enhancement
Prepayment rates across the Brass series have remained fairly high over the past year, averaging 21% per annum for Brass 1 and 2, and 40% for Brass 3. The high level of prepayments is driven by a large number of fixed- or tracker-rate borrowers opting to refinance their mortgages at the end of their fixed-rate or tracker-rate periods, instead of paying Accord's SVR. This is currently 5.79%, higher than the market average of 3.5%. Prepayments in these transactions are expected to remain high in the foreseeable future, as most loans are expected to revert to SVR by 2016 and 2017.

All three transactions' notes are amortising sequentially with no pro-rata triggers in place.

The high prepayments in combination with sequential amortisation are expected to contribute further to a steady build up in credit enhancement.

RATING SENSITIVITIES
In Fitch's view, as fixed-rate and tracker loans in all three transactions ultimately revert to floating rate, a sudden sharp increase in interest rates would put a strain on borrower affordability and potentially lead to a rise in arrears and subsequent default levels. Should such arrears and defaults exceed Fitch's current stresses, the agency may take negative rating action.