OREANDA-NEWS. Fitch Ratings has affirmed Greenhouse Funding (Proprietary) Limited - Series 1 as follows:

Class A2 notes: affirmed at 'AAA(zaf)'; Outlook Stable
Class A3 notes: affirmed at 'AAA(zaf)'; Outlook Stable
Class B notes: affirmed at 'A(zaf)'; Outlook Stable
Class C notes: affirmed at 'BBB(zaf)'; Outlook Stable

The transaction is a securitisation of the mortgage loans originated by Nedbank Limited (AA(zaf)/Stable/F1+(zaf)) in South Africa. The loan portfolio is largely static, since no new purchases or further advances are permitted, and loans replacements are subject to strict conditions. The transaction initially closed in 2007 and was refinanced in November 2012.

KEY RATING DRIVERS
Performance Within Expectations
The affirmation is based on the transaction's performance, which is in line with Fitch's expectations at the time of the 2012 refinance. Defaults are higher than other Fitch-rated South African RMBS transactions, but cumulative foreclosures of 2.7% of the 2012 refinance portfolio balance, and average loss severity on foreclosures to date of around 10%, are consistent with Fitch's 2012 refinance initial analysis.

In particular, we believe that the increase and subsequent fall in delinquencies over 90 days over 2014 (up from 2.9% of the portfolio balance in December 2013, to 3.8% in June 2014 and back to 3.2% in December) did not materially affect the transaction, as there was no corresponding increase in foreclosures. However, the servicer has not provided us with any explanation for this evolution, which may have been caused by the challenging economic environment in South Africa.

Interest Deferral Risk Constrains Ratings
While providing structural protection to the class A notes, the tight interest deferral triggers may result in a temporary interruption of interest payment to class B and C notes, if the transaction is unable to provision for portfolio losses. Despite the transaction's deleveraging and constant housing appreciation since the 2012 refinance, the risk of class B and C interest deferral remains moderately high and constrains the ratings of these notes.

RATING SENSITIVITIES
Based on the updated portfolio information we have updated our weighted average foreclosure frequency (WAFF) and weighted average recovery rate (WARR) assumptions as follows (WAFF%/WARR%): 29.9/65.3 for 'AAAzaf', 22.0/76.4 for 'Azaf', 18.1/81.0 for 'BBBzaf' and 10.3/89.0 for 'Bzaf'.

The class A notes could withstand a combined increase in assumed defaults and decrease in assumed recoveries by 30%; the class B notes by 15% and the C notes by 35%.