OREANDA-NEWS. Fitch Ratings has affirmed EMF UK 2008-1 plc, as follows:

Class A1a (XS0352932643): affirmed at 'AAAsf'; Outlook Stable
Class A2a (XS1099724525): affirmed at 'AAsf'; Outlook Stable
Class A3a (XS1099725415): affirmed at 'A-sf'; Outlook Stable

The UK non-conforming RMBS transaction is backed by loans originated by Southern Pacific Mortgage Limited (38.1%), Preferred Mortgages Limited (39%), Alliance & Leicester plc (18.6%) and London Mortgage Company (4.3%). The transaction was restructured in 2014 as a consequence of the Lehman Brothers bankruptcy, as Lehman Brothers was originally the swap counterparty in this transaction.

KEY RATING DRIVERS
Stable Asset Performance
The pool is of good quality for a non-conforming transaction. Near-prime mortgages make up 83.1% of the portfolio and the rest of the securitised assets are prime loans. As a result, arrears are relatively low. The portion of loans in arrears by more than three months has been below 8% since March 2011 and is currently 7.25%, well below the sector average of 9.8%. As a result, cumulative repossessions have remained limited at 5.3% of the initial pool balance. Combined with a weighted averaged loss severity in line with the sector's level, the cumulative losses remain below the Fitch UK non-conforming index.

Interest-Only Loan Concentration
The transaction has a high proportion of interest only (IO) loans (68.2%) and a concentration of more than 20% of IO loans maturing within a three-year period. As per its criteria, Fitch carried out a sensitivity analysis assuming a 50% increase in default probability for these loans and found that the credit enhancement is able to accommodate these stresses.

Features Providing Liquidity
The transaction has a GBP1.1m non-amortising reserve fund and a GBP3.0m liquidity reserve that can only amortise after the interest payment date in September 2016 provided that performance triggers are met. In addition, the structure can divert principal payment to pay interest on the class A1a and A2a notes and on the class A3a provided that the principal deficiency ledger on this tranche remains below 50%.

RATING SENSITIVITIES
As all the loans backing the transaction pay floating rates (77.1% over three-month Libor and 22.9% over BBR), an increase in interest rates could impact borrowers' affordability. This could lead to increase in arrears and repossessions and eventually trigger negative rating actions.

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
The information below was used in the analysis.
- Loan-by-loan data provided by Acenden as at 31 May 2015
- Transaction reporting provided by Acenden as at 15 June 2015
- Arrears information provided by Acenden as at August 2015

MODELS
The model below was used in the analysis. Click on the link for a description of the model.