OREANDA-NEWS. Fitch Ratings has affirmed Gracechurch Mortgage Funding (GMF) following a reduction in the available credit enhancement due to a redemption of the 2011-1 2A1, 2011-1 2A2 and 2011-1 2Z notes. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS
Reduced Credit Enhancement Remains Sufficient
Following the redemption of the 2011-1 2Z note, the credit enhancement available to the remaining notes has reduced to 13.1% from 20.6%. This comprises 7.2% from the remaining subordinate Z notes and 5.8% from the non-amortising reserve fund of GBP200m. Fitch has re-run its analysis of the outstanding GMF collateral pool and performed updated cash flow analysis based on the revised structure. All remaining notes pass the 'AAAsf' stresses and therefore Fitch has affirmed their ratings.

Arrears Outperform Average
The proportion of the GMF portfolio in arrears by more three months, excluding defaulted loans, has been consistently lower than the UK Master Trust average, remaining below 1% since the start of the transaction.

Consistent Underlying Asset Concentrations
The key characteristics of the mortgages in the pool have remained stable since the last issue in 2012, despite the pool size shrinking by GBP3.9bn due to prepayments and amortisation. Fitch found no evidence of negative selection in the current pool when considering indicators such as the distribution of original loan-to-value ratios, the proportion of interest-only loans, and the level of concentration in London and the South East.

RATING SENSITIVITIES
Fitch considers the ratings fairly insensitive to increasing stress factors, given the high levels of credit enhancement and the strong arrears performance to date. The portfolio demonstrated solid credit characteristics and Fitch expects the notes would be able to withstand the most extreme scenarios without the ratings coming under pressure.

The rating actions are as follows:
Gracechurch Mortgage Financing plc - Series 2011-1
Series 2011-1 Class 3A: affirmed at 'AAAsf'; Outlook Stable

Gracechurch Mortgage Financing plc - Series 2012-1
Series 2012-1 Class 1A: affirmed at 'AAAsf'; Outlook Stable
Series 2012-1 Class 2A: affirmed at 'AAAsf'; Outlook Stable
Series 2012-1 Class 3A: affirmed at 'AAAsf'; Outlook Stable
Series 2012-1 Class 4A: affirmed at 'AAAsf'; Outlook Stable
Series 2012-1 Class 5A: affirmed at 'AAAsf'; Outlook Stable
Series 2012-1 Class 6A: affirmed at 'AAAsf'; Outlook Stable