OREANDA-NEWS. November 30, 2015.  Fitch Ratings has assigned Grecale Rmbs 2015 S.r.l.'s floating-rate notes ratings, as follows:

EUR573.5m Class A, due December 2067, 'AA+sf'; Outlook Stable
EUR58.1m Class B, due December 2067, 'Asf'; Outlook Stable
EUR29.0m Class C, due December 2067, 'BBB+sf'; Outlook Stable
EUR65.4m Class J, due December 2067, 'NR'

The transaction is a static securitisation of residential mortgage loans originated by Unipol Banca S.p.A. (Unipol, 82.5% of the pool) and Banca SAI S.p.A. (SAI, 17.5%) before the latter merged into Unipol in 2014.

KEY RATING DRIVERS
Higher-Risk Portfolio Features
About 22% of the pool was granted to borrowers other than full-term employees, 9% was granted for purposes other than the purchase of a home and 4.6% consists of foreigners. Combined with 34% constant instalment and variable maturity products, embedding potential bullet risk under rising interest rates, and 19.8% loans granted to purchase a second home, this contributes to decrease the overall credit quality of the pool. Most high-risk features are over-represented compared with Grecale RMBS 2011 S.r.l. (Grecale 2011).

Weak Performance
Unipol's mortgage book shows increasing 90+ days arrears (including the Italian "incagli") reaching 5.2%, much higher than the Italian index of 1.5%. SAI's sub-pool is also highly concentrated in the worst-performing vintages of 2007-2009. Grecale 2011's performance has been volatile since closing. Fitch factored these considerations into its default assumptions.

Slow Historical Recoveries
Observed recovery data shows that the enforcement procedure has been completed for about 60% of the defaulted claims after more than nine years, with the remainder still unresolved. The agency has distributed its expected recoveries over 14 years.

Fully Hedged Portfolio
Three swaps limit the exposure to interest rate, basis and reset risks.

Deferrable and Capped Mezzanine Notes
Interest payments on the class B and C notes will be deferred if gross cumulative defaults exceed 16% and 14% of the initial pool, respectively. For these classes, Fitch's ratings address ultimate payment of interest by the legal maturity date.

Their coupon rate is capped at 5%, allowing more protection to the class A notes in a rising interest rate environment. However, Fitch notes that the structure is vulnerable to specific rising Euribor paths, which the agency has applied in its analysis.

Sovereign Country Ceiling
The class A notes' rating is the highest achievable for Italian transactions, six notches above Italy's sovereign Issuer Default Rating (BBB+/Stable/F2).

RATING SENSITIVITIES
Unexpected increases in the default rate and loss severity on defaulted loans could produce loss levels higher than Fitch's assumptions and could result in negative rating actions on the rated notes. Fitch evaluated the sensitivity of the ratings to increased credit losses over the life of the transaction. In particular, Fitch's analysis found that an increase of 30% in the default probabilities of the underlying obligors in combination with a 30% decrease in the assumed recovery rates could result in a downgrade of four notches for the class A notes, five notches for the class B and four notches for the C notes.

As the rating of the class A notes is constrained at Italy's Country Ceiling, changes to the Country Ceiling may lead to changes to the rating of the class A notes.

Key Rating Drivers and Rating Sensitivities are further described in the new issue report, which will shortly be available at www.fitchratings.com.

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

DATA ADEQUACY
Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated errors related to the property value information. These findings were immaterial to this analysis, as set out more fully in the new issue report.

Fitch conducted a review of a small targeted sample of Unipol's and SAI's origination files and found the information contained in the reviewed files to be adequately consistent with the originators' policies and practises and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the asset pool 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 Unipol as at 18 September 2015
Historical data provided by Unipol up to June 2015
Loan enforcement details provided by Unipol up to June 2015
Discussions with Unipol as of November 2015

MODELS
The models below were used in the analysis. Click on the link for a description of the model.
ResiEMEA
EMEA Cash Flow 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 this rating action commentary and the initial new issue report that will be available soon at www.fitchratings.com. In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.