OREANDA-NEWS. Fitch Ratings has affirmed Svensk Hypotekspension Fond 1 AB, as follows:

Class A1a (ISIN SE0003428465) affirmed at 'AAsf'; Outlook Stable
Class A1b (ISIN SE0003428457) affirmed at 'AAsf'; Outlook Stable

The transaction is a securitisation of equity release mortgages originated by Svensk Hypotekpension AB. Borrowers do not make payments on a regular basis. Instead, interest is accrued over the mortgage term and paid as a lump sum with the original loan amount at loan maturity. Loan maturity is triggered either by death, move to long-term care or voluntary prepayments.

Given the non-standard features of the underlying assets in the portfolio, in addition to its standard RMBS criteria Fitch also reviewed house price movements since transaction close, as well as the composition of the pool. The assessment focussed on borrower age and loan-to-value (LTV) ratios and other structural features that act as sources of revenue in order to assess the degree of risk that noteholders may be exposed to until legal final maturity in 2055.

KEY RATING DRIVERS
Increase in Swedish Home Prices
Swedish house prices have increased further in the past 12 months. The positive house price evolution has compensated for the decline in Stibor, which has reduced the rate of interest accrual on the mortgages.

The loans in the portfolio at origination are limited to a 45% LTV ratio and are dependent on the age of the borrower. The ability of the structure to generate sufficient cash flow necessary to make the ultimate payments on the notes is highly dependent on house prices and interest rates. In its analysis, Fitch applied different house price decline and interest rate stress scenarios. The analysis shows that the notes are able to withstand 'AA-sf' stresses, and the agency has therefore affirmed the ratings.

Sufficient Liquidity
The transaction features an amortising reserve fund, which presently stands at 1.7% of the current portfolio balance (including accrued interest). The facility is available to meet any shortfalls in senior fees and costs incurred by the structure. The fund remains at its target amount and is not expected to reach the SEK6m floor in the near term.

Exception to Criteria
The issuer and collection account, DNB Bank, is not rated by Fitch. However, based on public information, Fitch views the potential risk associated with the failure of DNB Bank as limited and therefore it has no impact on the notes' ratings.

RATING SENSITIVITIES
Significant deterioration in home prices, combined with loan maturity rates that diverge adversely from expectations, will increase the likelihood of a loss. However, Fitch believes that the low LTV ratios of the underlying loans provide a significant cushion against a downgrade.

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.

Fitch did not undertake a review of the information provided about the underlying asset pool 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 indicates that it is adequately reliable

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by Corpnordic Sweden AB as at 2 July 2015
- Transaction reporting provided by Corpnordic Sweden AB as at 27 June 2015

MODELS
Fitch's standard RMBS models are not applicable to the analysis of this type of mortgage. A statistical model provided by the arranger (Barclays) that replicates the agency's rating methodology at close is used to conduct the analysis. The model is updated to reflect the current structure and portfolio.