OREANDA-NEWS. Fitch Ratings has affirmed two tranches and downgraded one tranche of two Spanish RMBS deals, AyT Goya Hipotecario III and AyT Goya Hipotecario V.

Both transactions comprise loans originated by Barclays Bank SAU and serviced by CaixaBank, S.A. (BBB/Positive/F2). A full list of rating actions is available at the end of this commentary.

KEY RATING DRIVERS

Lower Counterparty Triggers
Upon CaixaBank's acquisition of Barclays Bank SAU on 2 January 2015, the direct support counterparty trigger definitions were amended to 'BBB'/'F2' from 'A'/'F1'. While the 'BBB'/'F2' trigger definition captured within the transaction documents is marginally outside the 'BBB+'/'F2' definition as per our structured finance counterparty criteria, Fitch considers the 'BBB'/'F2' to be sufficiently robust to support a maximum rating of 'A-sf' on the senior notes.

However, as the reserve fund is the only source of credit enhancement for the class B notes of AyT Goya Hipotecario III, the rating of the notes is now linked to the rating of CaixaBank. As a result the agency has capped the rating of the notes at the Long term Issuer Default Rating of the bank, as reflected in today's downgrade.

Stable Asset Performance
The deals have shown sound asset performance compared with the Spanish average. As of the latest reporting periods, three-months plus arrears (excluding defaults) as a percentage of the current pool balance remain below 1.2% for both transactions. These numbers are below Fitch's index of three-months plus arrears (excluding defaults) of 1.6%.

Cumulative defaults, defined as mortgages in arrears by more than 18 months in both deals, remain below the sector average of 5% and stand at 0.9% and 0.5% of the initial portfolio balance. However, Fitch believes that these levels may rise as late-stage arrears roll through to default.

Reserve Fund Draws
The reserve funds for AyT Goya Hipotecario III and AyT Goya Hipotecario V remain close to their targets, currently at 95.8% and 95.9% respectively. Fitch believes further draws may take place on future payment dates, but expect them to be small in size, with limited effect on the junior tranches' credit enhancements.

RATING SENSITIVITIES
A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift in interest rates could jeopardise the ability of the underlying borrowers to meet their payment obligations.

Should the effect of the macroeconomic factors result in more volatile arrears patterns or a material increase in default rates that exceed the agency's expectations, these trends may result in negative rating actions. Fitch may also take negative rating action if draws on the reserve fund occur in the next payment dates and are in excess of its assumptions, as this may compromise the credit protection of the junior classes.

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 transactions. 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.

Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions 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 indicates that it is adequately reliable.

Sources of Information:
-Investor and servicer reports since the close of the deals and provided by Haya Titulizacion S.G.F.T, S.A.
- Loan-by-loan data provided by:
Haya Titulizacion S.G.F.T, S.A. and sourced from the European Data Warehouse with a cut-off date of 30 April 2015

The rating actions are as follows:

AyT Goya Hipotecario III
Class A (ES0312274006) affirmed at 'A-sf', Outlook Stable
Class B (ES0312274014) downgraded to 'BBBsf' from 'BBB+sf'; Outlook Positive

AyT Goya Hipotecario V
Class A (ES0312276001) affirmed at 'A-sf', Outlook Stable