OREANDA-NEWS. Fitch Ratings has affirmed the FTA UCI series, four Spanish RMBS originated and serviced by the specialist lender Union de Creditos Immobiliarios (UCI). A full list of rating actions is available at the end of this commentary.

KEY RATING DRIVERS
Fewer Mortgage Renegotiations
Since 2009 the servicer has actively managed borrowers in distress through loan renegotiations, which currently constitute a large proportion of the underlying portfolios. The renegotiations allow current instalments to be reduced for a certain period of time on a case-by-case basis. Fitch observes that, over the transaction's life, renegotiations have been applied to between 48% (UCI 14) and 54.3% (UCI 17) of the current pool.

To date, the proportion of loans currently under reduced instalment represents between 30.2% (UCI 14) and 35.7% (UCI 17) of the current pool, compared with a range between 31% (UCI 14) and 36.7% (UCI 17) 12 months ago. Stabilisation in the proportion of renegotiated loans points to a more stable asset performance, underlining more loans are returning to performing status. At the same time, a smaller number of performing borrowers has applied for the scheme over the last year. Fitch expects the utilisation of the renegotiation scheme to decrease as economic recovery continues.

In its analysis Fitch has assigned more conservative default assumptions to loans currently under renegotiation, in line with the ones applied to loans in advanced delinquency status, since historically these mortgages have shown a higher roll-through-default rate. The analysis showed that despite the additional stresses applied the current credit enhancement available was sufficient to withstand such stresses.

Improving Asset Performance
Over the last 12 months the proportion of late-stage arrears, defined as loans with three or more monthly instalments overdue, declined to between 5.1% (UCI 15) and 6.2% (UCI 16) compared with between 6.9% (UCI 15) and 8.5% (UCI 17) in December 2014.

An improving economic environment in Spain is the main driver for the more stable asset performance and should have a positive impact in the next 12 months. This, together with a decreasing exposure to portfolio renegotiations, drives the Outlook revision to Positive for the senior notes of UCI 14 and 15 and to Stable for the senior notes of UCI 16 and mezzanine notes of UCI 14 and 15.

Substantial Excess Spread
As the majority of the loans across the portfolios are indexed to the IRPH (Indices de Referencia de Prestamos Hipotecarios), which is higher than the interest rates paid on the notes, the transactions benefit from healthy levels of excess spread. To date the available excess spread has been able to fully provision for write-offs in UCI 14 and 15.

Fitch reduced the available excess spread to account for the proportion of un-cured renegotiations, defined as renegotiated loans, which have had at least one case of arrears in the last three years, currently estimated between 9% (UCI 17) and 18.5% (UCI 16). The adjustment has had no impact on the ratings.

RATING SENSITIVITIES
Volatile asset performance in excess of Fitch's stresses may lead to negative rating actions.

A combination of performance improvement, higher payment rates and robust recovery income, compared with Fitch base case, may have a positive rating impact.

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, 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-by-loan data provided by Banco Santander and UCI as at 31 December 2015
-Transaction reporting provided by Banco Santander as at mid-December 2015

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