OREANDA-NEWS. Fitch Ratings has affirmed Marche Mutui 4 Srl (MM4) and Marche M6 (MM6) as follows:

Marche Mutui 4 Srl:
Class A (ISIN IT0004515794): affirmed at 'Asf'; Outlook revised to Positive from Stable

Marche M6:
Class A1 (ISIN IT0004941271): affirmed at 'AA+sf'; Outlook Stable
Class A2 (ISIN IT0004941297): affirmed at 'AA+sf'; Outlook Stable
Class A3 (ISIN IT0004941305): affirmed at 'AA+sf'; Outlook Stable

The two Italian RMBS transactions comprise mortgage loans originated and serviced by Banca delle Marche. MM4 also includes SME loans, while MM6 is backed by a fully residential portfolio.

KEY RATING DRIVERS

Stable Asset Performance of MM6
As of end-October 2015, late-stage arrears (loans with more than three unpaid monthly instalments) were reported at 0.8% of the outstanding portfolio balance, unchanged over the previous 12 months. Cumulative gross defaults remained below the Italian average (4.4%) at 1.75% of the original asset balance despite a more conservative default definition (mortgages with more than six monthly instalments overdue) than in most deals of the same jurisdiction.

MM6's weighted average original loan-to-value (OLTV) ratio (59.2%) is at the lower end of Italian mortgages' OLTV (between 60% and 70%) and represents a major driver of the positive asset performance. Fitch believes self-employed borrowers to be the main risk, representing 23.3% of the performing portfolio, 42.5% of arrears and 47.9% of defaults.

Commercial Mortgages Drive MM4 Performance
Gross cumulative defaults (15.4%) increased 80 bps over the previous 12 months to October 2015 and late arrears remained above the market average (1.7%) at 2.6% (-70bps yoy).

The MM4 portfolio consists of residential (78.8%) and commercial (21.1%) mortgages. In particular, the commercial pool comprises loans granted to SMEs (18.6%) and to individuals but backed by commercial properties (2.5%). Half of the defaults were experienced by SME mortgages, which therefore represent the main risk for the transaction's performance.

In its analysis, Fitch has considered the additional risk imposed by SME loans. In particular, the agency included inputs from peer transactions to derive conservative default assumptions on the relative sub-pool.

However, the amortisation of the commercial sub-pool to 21.8% of its original balance and the decrease of late arrears suggest a stabilisation in future performance, as reflected in the change of the Outlook to Positive from Stable.

Payment Interruption Risk Mitigated

Fitch has assessed the ability of the structures to cope with the loss of their servicer. A first provision is the appointment of Italfondiario SpA (RPS2+/RSS1-) as back-up servicer. The agency therefore believes that the disruption of servicing activities could affect only one interest payment date (IPD). The reserve funds, which can solely be used to cover interest shortfalls, account for 6.3% and 3.1% of the class A notes balance in MM4 and MM6 respectively. The size of the cash reserves is, in Fitch's view, enough to guarantee the payment of senior fees and interests on the notes, under stressed Euribor assumption, for one IPD.

Sufficient Credit Enhancement
The available excess spread, although fully retained in both transaction structures, has only partially covered period defaults, resulting in under-collateralisation of EUR250m (55% of the subordinated class J) in MM4 and EUR50.5m (10.2% of the class J) in MM6. In MM4 this is mainly due to the large amount of defaults while in MM6 it is due to the high interest on the class A1 notes.

Nevertheless, the credit enhancement (CE) available to class A notes in MM6 (26.5% of the outstanding portfolio) and MM4 (37.8%) is sufficient to withstand the stresses applied in the analysis, as reflected in the affirmation of their ratings.

RATING SENSITIVITIES
Changes to Italy's Long-term Issuer Default Rating (BBB+/Stable) and the rating cap for Italian structured finance transactions, currently 'AA+sf', could trigger rating changes to the senior tranche in MM6.

In MM6, 70.3% of the current pool is represented by floating-rate loans originated after January 2009, hence in a low interest rate environment. The additional stress imposed on these loans by an interest rates increase, if resulting in a deterioration of their performance beyond Fitch's expectations, could also lead to negative rating actions.

Stabilisation of MM4's performance, with a further reduction of the SME sub-pool size, restoring excess spread and reducing the notes' under-collateralisation, may lead to positive rating action on the senior tranche.

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.

Prior to MM4 closing, Fitch did not review the results of a third party assessment conducted on the asset portfolio information.

Prior to MM6 closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Prior to the transactions closing, Fitch conducted a review of a small targeted sample of Banca delle Marche'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 Banca delle Marche as at end-October 2015 (MM4) and at end-September 2015 (MM6)
-Transaction reporting provided by Securitisation Services SpA as at end-July and -end-September 2015 (MM4) and end-September 2015 (MM6)

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