OREANDA-NEWS. Fitch Ratings has affirmed Precise Mortgage Funding 2014-1 plc (PMF 2014-1), a securitisation of UK near-prime residential mortgages originated by Charter Court Financial Services (CCFS), trading as Precise Mortgages (Precise) in the UK (excluding Northern Ireland).

A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS
Near-Prime Mortgages
The portfolio was originated post crisis. Fitch considers the origination criteria under which the loans were granted to be of near-prime nature, with limited exposure to borrowers with adverse credit history. Borrowers with prior bankruptcy orders and individual voluntary arrangements are not included in the portfolio. The underwriting policies are reflected in the securitised portfolio: 15.5% of the borrowers have been subject to country court judgements (CCJs) and 2.3% have previously been in arrears on their mortgages. These proportions are in line with what Fitch expects from a near-prime lender.

Stable Asset Performance
During the past 12 months, loans with more than three monthly instalments overdue have increased to the current 0.1% of the portfolio balance from 0%, while the total arrears account for 0.3% of the total pool. No properties have been taken into possession and as such no losses have yet been realised.

In Fitch's view, the good asset performance to date is mostly due to the very low weighted average seasoning of the portfolio (15 months), which means that borrowers are unlikely to have experienced financial distress yet. Based on loan-by-loan level data received from the issuer, Fitch identified that loans in arrears are mainly linked to self-employed borrowers (39.1% of the arrears balance compared with 14.8% of the performing balance) and borrowers with past CCJs (26.1% of arrears compared with 15.4%). The agency notes that these findings are based on a limited sample of borrowers presently in arrears.

Sufficient Credit Enhancement (CE)
The Fitch calculated CE, excluding the GBP6.9m reserve fund (currently operating as a liquidity ledger only and therefore not available to cover for principal losses on the notes) ranges from 2.2% for the class D notes to 15.7% for the class A notes. Fitch considers these levels are sufficient to support the rating stresses on the notes, as reflected in their affirmation.

Payment Interruption Risk Mitigated
Should the servicer (CCFS; RPS2-) default, the available liquidity is sufficient to cover two payment dates worth of interest on the senior notes and senior fees. Fitch's payment interruption analysis is performed under stressed Libor assumptions and considers the margin step-up, which is expected to occur in June 2019.

RATING SENSITIVITIES
An increase in the market interest rates will put pressure on borrowers' affordability, and potentially cause deterioration in the asset performance. Should this deterioration in the asset performance result in defaults and losses on properties sold in excess of Fitch's expectations, the agency may take negative rating action on the notes.

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 pool and the transaction. There were no findings that were material to this analysis. 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.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of CCFS's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by US Bank as at 31 May 2015
- Transaction reporting provided by US Bank as at June 2015

MODELS

EMEA RMBS Surveillance Model.

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Precise Mortgage funding 2014-1 - Appendix, dated 22 July 2014 at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 26 March 2015 available on the Fitch website."

Fitch has taken the following rating actions:

Class A notes (ISIN XS1082039865) affirmed at 'AAAsf'; Outlook Stable
Class B notes (ISIN XS1082040103) affirmed at 'AAsf'; Outlook Stable
Class C notes (ISIN XS1082040798) affirmed at 'Asf'; Outlook Stable
Class D notes (ISIN XS1082041689) affirmed at 'BBBsf'; Outlook Stable.