OREANDA-NEWS. Fitch Ratings has maintained Finance for Residential Social Housing (Fresh) PLC's Series 1 and 2 notes on Rating Watch Negative (RWN), as follows:

Series 1 Class A1 notes: 'AA+sf'; RWN maintained
Series 1 Class A2 notes: 'AA+sf'; RWN maintained
Series 1 Class A3 notes: 'AAsf'; RWN maintained
Series 1 Class B notes: 'BBBsf'; RWN maintained
Series 2 Class A notes: 'AAsf'; RWN maintained
Series 2 Class B notes: 'BBBsf'; RWN maintained

Fresh is a securitisation of housing loans originated by The Housing Corporation (THC), Housing for Wales Tai Cymru (TC) and the Public Works Loan Board (PWLB), to housing associations in England and Wales. The series 1 notes are backed by fixed-rate loans while the series 2 notes are backed by variable-rate loans.

KEY RATING DRIVERS
Some of the reporting issues that led to the placement of the notes on RWN on 24 September 2014 still need clarification. We do not expect these issues to materially affect the analysis of series 1, but their impact may be significant on series 2. For both series, the RWN has been maintained pending the provision of additional obligor information needed for the analysis.

Royal Bank of Scotland (RBS; BBB+/Stable/F2), as the cash administrator of the transaction, has maintained the reporting of two different asset balances for each series portfolio but it has not explained the reason the difference in these balances. This causes some uncertainty on the notes' credit enhancement. We expect the difference in asset balances to be fully clarified in the investor report prior to any resolution of the RWN. We understand RBS is currently investigating this.

Several questions on the accrued interest on the series 2 loans and notes remain outstanding. The cash manager determined that the balance of the series 2 A and B notes already includes the reported GBP1,765,866 of deferred interest, contrarily to an earlier statement. However, the amount of interest deferred on the series 2 loans, which we understand is not yet included in the reported balance, is still being ascertained by RBS. This amount could significantly affect the rating of the series 2 class A, since under the notes' terms and conditions deferred amounts are to be repaid only after the full principal redemption of the class A and B notes.

The issuer has not yet taken any decision on providing credit information on the underlying borrowers. Fitch deems this information crucial in resolving the RWN, particularly for series 2.

RBS is currently looking for a replacement or guarantee in its role as the account provider. Under Fitch's counterparty criteria, RBS's ratings no longer support note ratings any higher than 'A+'. The notes' ratings may be downgraded if the arrangements put in place do not sufficiently reduce the transaction's counterparty exposure to RBS.

Fitch is also in the process of refining certain of its default and recovery assumptions on the borrowers in light of available regulatory and sector information. These assumptions will be used to determine the notes' ratings upon resolution of the RWN.

RATING SENSITIVITIES
We expect that any downgrade of the series 1 notes would not exceed one rating category. The risk and possible magnitude of the downgrade is greater for series 2, due to the higher borrower concentration in this series and possibly, the reconsideration of deferred interest in our analysis. The requested borrower information is hence particularly crucial for our analysis of series 2. The series' ratings may be withdrawn if this information is not forthcoming.

We expect to resolve the RWN within three months although this will depend on if or when the additional information can be provided. So far neither RBS or other involved parties have indicated when reporting issues are to be resolved and available borrower credit information is to be provided.

The notes' ratings may also be downgraded if a replacement or guarantee of RBS in its role as the account bank provider fails to be found in due course.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transaction. We found that two different assets balances are currently reported for each series, and that the differences in these amounts are currently not explained. The amount of interest deferred on the series 2 loans, in our view part of the assets to consider in our analysis, is also missing. We expect these issues to be addressed prior to our resolution of the RWN.

Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies - save for the above mentioned reporting issues, which are being addressed - indicates that it is adequately reliable.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data on each of the Series 1 and 2 provided by RBS as at end-March 2015.
- Transaction reporting provided by RBS as at April 2015 (latest available investor report, reporting is semi-annual)