OREANDA-NEWS. July 14, 2015. Fitch Ratings has downgraded the following Eleventh Mortgage-Backed Notes Trust's (Eleventh Trust) notes:

--\\$37.8 million series A senior notes to 'BBsf' from 'BB+sf'.

The Rating Outlook is revised to Stable from Negative.

Fitch's rating addresses the timely payment of interest on a monthly basis and ultimate payment of principal by legal final maturity in October 2041.

KEY RATING DRIVERS
The rating action reflects the recent downgrades of El Salvador's foreign currency Issuer Default Rating (FC IDR) to 'B+' with a Stable Outlook and country ceiling (CC) to 'BB' from 'BB+'.

According to Fitch's 'Criteria for Rating Securitizations in Emerging Markets' (November 2014), the ratings of emerging market securitizations are linked to the sovereign ratings of a particular country. While the transaction has sufficient credit enhancement to be rated above the country's FC IDR, the rating remains constrained by the country ceiling and ultimately linked to the ratings of El Salvador.

The transaction contains some liquidity to mitigate potential transfer risk, but this level is not sufficient to provide significant rating benefit to breach the CC. Additionally, Fitch believes the macroeconomic environment to be more volatile as the sovereign rating levels are decreased. When rating a transaction above the IDR of a country the transaction must have sufficient credit enhancement to withstand an increase in risk within the macroeconomic environment.

The transaction was stressed using a 6.0x historical default rate which is sufficient to go up to the CC or two notches above the FC IDR.

The Outlook revision on the transaction reflects the Stable Outlook on El Salvador's FC IDR, which indicates Fitch's assessment that upside and downside risks to the rating are currently balanced.

RATING SENSITIVITIES
The rating of the series A notes is sensitive to changes in the credit quality of El Salvador. A further downgrade of El Salvador's ratings, specifically its country ceiling ('BB'), could lead to a downgrade on the notes. In addition, severe increases in frequency of foreclosure and prepayments as well as reductions in recovery rates could lead to a downgrade of the notes.

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

TRANSACTION SUMMARY
The \\$37.8 million series A senior notes are backed by residential mortgages denominated in U.S. dollars made to lower-middle-income borrowers in El Salvador by La Hipotecaria. In addition, the Eleventh Mortgage Trust issued \\$5.4 million in series B notes and \\$1.8 million in series C notes, which have not been rated.