OREANDA-NEWS. Fitch Ratings has affirmed Gracechurch Mortgage Financing Plc (Gracechurch), Langton Securities plc (Langton) and Lannraig Master Issuer plc (Lannraig), three UK prime master trust programmes. A full list of rating actions is at the end of this commentary.

Gracechurch consists of prime residential owner-occupied mortgage loans historically originated in the UK by Barclays Bank Plc (Barclays; A/Stable/F1).

Langton consists of prime residential owner-occupied mortgage loans historically originated in the UK by Alliance & Leicester Plc, Abbey National plc and Santander UK plc (Santander; A/Stable/F1). Santander is a wholly-owned subsidiary of Banco Santander SA (A-/Stable/F2).

Lannraig comprises prime residential buy-to-let mortgage loans originated in the UK by Clydesdale Bank plc (BBB+/Stable/F2) and Yorkshire Bank Home Loans Limited.

KEY RATING DRIVERS
High Credit Enhancement
Gracechurch and Lannraig have socialist structures that share subordination and reserve funds. As of November 2015, credit enhancement (CE) for the class A notes was 17.8% and 16.7%, respectively, which is higher than at their last issuances (15.4% and 15.4% respectively), following the scheduled amortisation.

The Langton programme has a capitalist structure, whereby each issuer has its own CE and amortisation schedule. Over the 12 months to November 2015 the CE for the 2010-1, 2010-2 and 2011-1 series had increased to 21.9%, 29.4% and 28.8% from 20.4%, 27.0% and 25.8% respectively.

Improved Arrears Performance
The proportion of borrowers in arrears by more than three months has remained broadly stable over the past 12 months. As of November 2015 the levels stood at 0.9%, 0.5% and 2.1% for Gracechurch, Lannraig and Langton, respectively. Given the seasoning of the loans, the quality of the collateral and the history of originator loan repurchases, Fitch expects arrears to remain limited.

Consistent Underlying Asset Concentrations
The agency found the pool characteristics to be comparable with those at the time of last review and also within the eligibility criteria defined in the transaction documentation. Fitch has found no evidence of negative selection in the current pool from indicators such as the average original loan-to-value ratio, the proportion of interest-only loans, and the level of concentration in London and the South East.

Stressed Pool Characteristics
Given the ability of the programmes to include new loans in the pools Fitch has stressed the current pool characteristics to the maximum allowed by each programme's substitution criteria in order to test the impact of a worst case scenario in terms of loan characteristics. Fitch found that in all cases the current CE is sufficient to withstand these additional stresses.

Adjusted Quick Sale Adjustment (QSA)
Based on information provided to Fitch during 2015, the agency has revised upward its QSA assumption to 20% from 17% for Gracechurch. Fitch also revised the QSA of Lannraig to 40% from the 27% to 35% specified in the criteria. In all cases the current CE is sufficient to withstand these additional stresses.

Counterparty Exposure
In its analysis, Fitch tested for excessive counterparty exposure by assessing the effect of the loss of the reserve fund held in the transactions' bank accounts. Given the current CE, Fitch found there would be no material changes in the notes' ratings in the event the account banks jump to default.

Swap Changes
Following the restructuring of Lannraig in December 2015, the transaction is now unhedged for interest received on the Bank Base Rate linked mortgages and three-month GBP Libor linked note payments. The portion of SVR loans remains hedged by a swap provided by Clydesdale although no replacement triggers are in place. Given these changes, Fitch has considered the transaction to be unhedged and applied an additional stress in its analysis, which we believe the available and projected CE are sufficient to withstand.

Commingling Exposure
Fitch believes the removal of the collection account bank replacement triggers exposes the transaction to commingling risk. The agency has captured this additional stress in its analysis and found the current CE sufficient to withstand it.

RATING SENSITIVITIES
Fitch considers the ratings fairly insensitive to increasing stress factors, given the high CE and strong arrears performance to date. However Fitch notes that given the nature of master trusts if new notes are issued or subordinated notes are redeemed CE may decrease in the future.

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 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.

For Gracechurch 2012-1, Langton 2010-2, Langton 2008-1, Lannraig 2011-1 and Lannraig 2012-1 prior to the transaction 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.

For Lannraig 2012-1 prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator 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.

For Gracechurch 2011-1 prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator origination files and found inconsistencies or missing data related to the following information: income was not verified centrally and proof of income was not available at the central underwriting unit for fast-track applications. These findings were considered in this analysis by assuming 42.8% of the loans as at transaction close were fast track.

Overall, and together with the assumptions referred to above, 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 Level Data was used and the relevant data sources were:
- Barclays with a cut-off date of 31 December 2015 for Gracechurch
- Clydesdale with a cut-off date of 31 October 2015 for Lannraig
- Santander with a cut-off date of 31 December 2015 for Langton

Transaction reporting provided by:
- Barclays since close and until November 2015 for Gracechurch
- Clydesdale since close and until November 2015 for Lannraig
- Santander UK since close and until November 2015 for Langton

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