OREANDA-NEWS. Fitch Ratings has affirmed Eurosail-UK 07-4BL Plc. A full list of rating actions is at the end of this commentary.

The transaction is a securitisation of near-prime and sub-prime residential mortgages originated by Southern Pacific Mortgage Limited, Preferred Mortgages Limited, Alliance and Leicester Plc and Matlock Bank Limited.

KEY RATING DRIVERS
Relatively Stable Performance
The performance of the transaction has remained relatively stable with loans in arrears by three months or more at 17.6% of the collateral balance in comparison with 17.8% in September 2014. As of September 2015, cumulative repossessions stood at 13.8% of the initial collateral balance. Both ratios are above Fitch's three-month plus arrears and cumulative repossessions index for non-conforming UK RMBS closed in 2007, which stand at 10.0% and 11.7%, respectively. Nevertheless, they are performing in line with the other Eurosail-UK transactions that were originated in 2007 and 2008.

Quick Sale Adjustment
At the restructuring of the transaction in 2014, Fitch received recovery information for the first-lien loans. The analysis showed that the recoveries are in line with Fitch's UK criteria. The reported recoveries to date are lower than expected due to the presence of second-lien loans in the transaction. To account for the recoveries of the second-lien loans, the agency has increased its quick sale adjustment assumption.

Fully Funded Reserve Fund
The reserve fund remains fully funded at 0.9% of the outstanding note balance. Fitch expects the transaction to generate sufficient annualised gross excess spread to cover any realised loss due in the upcoming payment dates.

RATING SENSITIVITIES
Fitch believes that an increase in interest rates could put a strain on borrower affordability, particularly given the weaker profile of the underlying non-conforming borrowers. If defaults and associated losses increase beyond the agency's stresses, the junior tranches may be downgraded.

Fitch published an exposure draft for UK residential mortgage assumptions on 22 September 2015(https://www.fitchratings.com/creditdesk/reports/report_frame_render.cfm?rpt_id=871376). The proposed criteria, if adopted, will lead to smaller loss expectations for all types of mortgage portfolios. As a result, Fitch expects all outstanding UK RMBS and covered bond ratings to either be affirmed or upgraded. If the current criteria are updated after considering market feedback, Fitch will review all existing UK RMBS ratings within six months of the new criteria publication.

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.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

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 Limited (Acenden, 'RPS2+'RWE; 'RSS2'RWE) as at 31 May 2015
- Transaction reporting provided by Acenden as at 14 September 2015

Fitch has taken the following rating actions:

Class A2a (XS 0311680747): affirmed at 'AAAsf'; Outlook Stable
Class A3 (XS 1150797600): affirmed at 'AAAsf'; Outlook Stable
Class A4 (X S1150799481): affirmed at 'AAsf'; Outlook Stable
Class A5 (XS1150799721): affirmed at 'AA-sf'; Outlook Stable
Class B1a (XS0311705759): affirmed at 'BBB+sf'; Outlook Stable
Class C1a (X50311708696): affirmed at 'Bsf'; Outlook Stable
Class D1a (XS0311713001): affirmed at 'CCsf'; Recovery Estimate of 50%
Class E1c (XS0311717416): affirmed at 'Csf'; Recovery Estimate of 0%