OREANDA-NEWS. Fitch Ratings has assigned Fastnet Securities 3 Limited's notes the following final ratings:

EUR962,117,560 Class A1: 'A+sf', Outlook Stable
EUR2,336,900,000 Class A2: 'A+sf', Outlook Stable
EUR 2,003,058,672 Class B: 'NR'

The transaction is an RMBS securitisation of EUR5.34bn of owner-occupied (77.4%) and residential investment properties (22.6%) residential mortgages originated in Ireland by Permanent TSB plc (PTSB). The transaction closed in 2007 and is the third standalone pass-through transaction by the issuer under this series to be rated by Fitch.

The ratings reflect the credit enhancement available for each class of rated notes. Credit enhancement for the class A notes is provided by the subordination of the unrated class Z notes (37.8%), the reserve fund (1.5%), and excess spread. Each class of A notes provides subordination to the notes senior to it.

Prior to an enforcement event, interest is paid sequentially between the class A and Z notes and pro rata between the class A notes. Principal is applied firstly to pay senior fees and sequentially between the class A and Z notes, and sequentially between the class A notes. Post-enforcement the notes will be paid interest and principal pro rata (and principal sequentially between the class A1 and A2 notes etc.).

Since closing, the transaction has undergone two restructures in 2011 and 2012. While Fitch does not take a view on whether the restructures were allowed under the terms of the documents or if they were in the interest of noteholders, the agency believes these restructures have not affected Fastnet 3's ability to repay the notes under the terms and conditions of the transaction documentation.

The transaction opinion was updated following the restructures undertaken in 2011 and 2012. However, the transaction opinions and transaction documentation were not updated for the purposes of this rating. Fitch received advice (legal opinion) from its counsel that no changes in Irish law have occurred since the original transaction opinion was issued, or the subsequent restructures, that would invalidate the 'true sale' of the loans, nor have any changes in Irish law occurred that would impact on the accuracy of the opinions on any points that are material to Fitch.

KEY RATING DRIVERS
Peak Year Lending
The pool has a high percentage (64.4%) of peak year lending (2005-2007) and an indexed weighted average (WA) current loan-to-value (CLTV) of 111.2%. Irish house prices fell by nearly 50% from September 2007 to March 2013 leaving many borrowers in negative equity. Nearly 77% of borrowers in this portfolio have an indexed WA CLTV greater than 100%, which is in line with many Irish RMBS transactions rated by Fitch.

Class A Note Rating
The transaction documentation does not include Fitch's minimum rating for a direct support counterparty nor the timeframe for remedial action to be taken in the event of a direct support counterparty falling below the minimum rating. This is not in line with Fitch's Counterparty Criteria and therefore the highest achievable rating for the class A1 and A2 notes is capped to the rating of the account bank provider (BNP Paribas, Dublin Branch; A+/Stable).

Restructured Loans
Fitch was provided with detailed information on restructured loans for the portfolio. Just under 33% of the loans have undergone some form of loan restructure with 17% occurring in the last two years. Fitch has applied an increase to the foreclosure frequency (FF) for restructured loans (between 10%-70%) based on the type of restructure and the time since the restructure was completed.

Residential Investment Properties (RIP)
22.6% the pool consists of RIP loans, which have performed worse than owner-occupied loans, in line with the industry average. Fitch continues to stress the default rates for RIP loans beyond those of prime owner-occupied loans at all rating levels. RIP loans do not fall under the Code of Conduct on Mortgage Arrears and while this would be expected to lead to a quicker repossession process than for owner-occupied loans it has not yet proved to be the case.

RATING SENSITIVITIES
Material increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case expectations, which in turn may result in negative rating actions on the notes. Fitch's analysis revealed that a 30% increase in the WA foreclosure frequency (FF) along with a 30% decrease in the WA recovery rate would result in a model-implied downgrade of the class A1 notes to 'A-sf'.

More detailed model implied ratings sensitivity can be found in the new issue report, which is available at www.fitchratings.com.

Fitch was provided with a loan-by-loan data template and most of the relevant fields were provided. PTSB was unable to provide the interest coverage ratio or the rental income for RIP loans and therefore a class 5 ICR was assumed on all RIPs. PTSB was also unable to provide data on borrowers who remortgaged to consolidate their outstanding debts. Fitch assumed that half the remortgages were for debt consolidation and applied a 50% FF adjustment to these loans.

Loan-level data on sold repossessions provided by PTSB consisted of 490 loans sold between 2009 and 2014. The agency used this data to analyse the originator's quick sale adjustment (QSA), which at 40% is higher than Fitch's base case assumption of 35% for Ireland.

Fitch carried out a file review of the loans in the portfolio. There were errors on some files where the loan type or repayment classifications, or valuation provided in the pool-tape differed from the details on file. PTSB confirmed the errors related to data entry errors and were able to provide supporting documentation to satisfactorily answer all queries. No errors had a material impact on the underwriting decision or loan performance. These errors did not impact on Fitch's analysis.

Fitch reviewed the results of an Agreed Upon Procedures (AUP) carried out in 2007 and found no material errors.

It is Fitch's opinion that the data available for the rating analysis is of good quality.

To analyse the credit enhancement levels, Fitch evaluated the collateral using its default model ResiEMEA. The agency assessed the transaction cash flows using default and loss severity assumptions under various structural stresses including prepayment speeds and interest rate scenarios. The cash flow tests showed that each class of notes could withstand loan losses at a level corresponding to the related stress scenario without incurring any principal loss or interest shortfall and can retire principal by the legal final maturity.

A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for that asset class is available by accessing the appendix that accompanies the new issue report (see "Fastnet Securities 3 Limited - Appendix", at www.fitchratings.com).