OREANDA-NEWS. Fitch Ratings has affirmed 17 tranches and upgraded one tranche of five AyT RMBS transactions. The Outlook on one tranche has been revised to Stable from Negative. A full list of rating actions is at the end of this rating action commentary.

The transactions are part of a series of RMBS transactions that are serviced by Kutxabank, S.A. (Kutxabank; BBB/Positive/F3) for AyT Hipotecario BBK I and AyT Hipotecario BBK II, Banco de Castilla La Mancha S.A. (BB/Stable/B) for AyT CGH CCM I; Abanca Corporacion Bancaria, S.A. (BB+/Stable/B) for AyT CGH Caixa Galicia II and Liberbank, S.A. (BB/Stable/B) for AyT CGH Caja Cantabria I.

KEY RATING DRIVERS
Stable Credit Enhancement (CE)
The notes in AyT CGH CCM I, AyT Caja Cantabria I and AyT Hipotecario BBKI and BBKII are currently paying sequentially. As delinquencies are above the trigger levels a switch to pro-rata is not expected in the near future. Fitch considers the existing and projected CE sufficient to support the ratings, as reflected in the affirmations and the revision of the Outlook on one tranche to Stable from Negative.

AyT CGH Caixa Galicia II may change to pro-rata amortisation in the next 12 to 18 months as the reserve fund is close to its target level and arrears are decreasing and could soon fall below the 1.25% trigger level. Given the high level of CE available to the senior notes Fitch considers the notes can now sustain higher rating stresses, as reflected in the upgrade.

Stable Arrears Performance
With the exception of AyT CGH CCM 1, as of the latest reporting periods three-months plus arrears (excluding defaults) as a percentage of the current pool balance are decreasing and range from 0.5% (BBK II as of October 2015) to 2.2% (Caixa Galicia II as of October 2015) compared with 0.8% (BBK I as of October 2015) to 2.3% (Caja Cantabria I as of September 2015). These numbers remain comparable with Fitch's prime index of three-months plus arrears (excluding defaults) of 1.1%.

AyT CGH CCM 1 has seen increasing arrears over the past 12 months from 1.6% (November 2014) to 3.0% (November 2015). Fitch notes this may lead to further defaults and increasing pressure in the reserve fund and has revised down the Recovery Estimates on the class C and D notes.

With the exception of AyT CGH CCM I, cumulative defaults, defined as mortgages in arrears by more than 18 months, are currently below the average for the sector of 5.3%. Fitch believes that this difference can be attributed to the high proportion of self-employed borrowers at origination on AyT CGH CCM I.

Reserve Fund Draws
AyT Hipotecario BBK I and BBK II are the only transactions to feature a fully funded reserve fund. AyT CGH Caixa Galicia II is close to its target at 99%. The reserve fund for AyT CGH CCM I was almost fully depleted on May 2011, but a steady default pace and high levels of excess spread has allowed continued replenishments since then. As of end-November 2015, the reserve stood at 63% of its target amount, up from 35% in November 2014. Given the stable performance of AyT Galicia II, Fitch believes further replenishments will take place on the next payment dates. In contrast, given the increasing arrears on AyT CGH CCM I Fitch cannot rule out that replenishments to the reserve fund will stop in future.

As of September 2015, AyT Caja Cantabria I's reserve fund is down to 45.4% from 67.8% 12 months ago. Given the increasing trend in defaults, Fitch believes further draws will take place on the next payment dates.

Payment Interruption Risk
AyT CGH CCM I and AyT Caja Cantabria I have a dynamic cash reserve sized to cover six months of interest on tranche A and senior fees. However, while Fitch considers this cash reserve plus the below target reserve fund balance sufficient to mitigate payment interruption risk, Fitch notes that if further draws continue to take place this liquidity may be insufficient, which could lead to negative rating action.

In contrast AyT CGH Caixa Galicia II and both BBK deals have sufficient liquidity to cover payments due to relevant counterparties, in case of default of the servicer and the collection account bank.

Commingling Exposure
Fitch believes the transactions have commingling loss exposure as there is no certainty regarding the timely cessation of further payments into the commingled accounts and in the case of AyT CGH Caixa Galicia II due to the concentration of payments on one day of the month. The agency has captured this additional stress in its analysis and found the current CE is sufficient to mitigate the risk.

Maturity Extensions
Based on information provided by the servicers, Fitch found that some borrowers in all transactions have been offered maturity extensions to their loans. Fitch considers this signals a weaker borrower profile and has increased the foreclosure frequency for these loans. The agency found the current CE is sufficient to mitigate the risk.

RATING SENSITIVITIES
A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift of interest rates could jeopardise the underlying borrowers' affordability.

The ratings are also sensitive to changes to Spain's Country Ceiling (AA+) and, consequently, changes to the highest achievable rating of Spanish structured finance notes (AA+sf).

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, 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 obtained from the European Data Warehouse with a cut-off date of:
30 January 2016 for AyT Hipotecario BBK I and BBK II
23 November 2015 for AyT CGH CCM I
31 December 2015 for AyT CGH Caja Cantabria I
31 October 2015 for AyT CGH Caixa Galicia II

Transaction reporting provided by Haya Titulizacion since close and until:
October 2015 for AyT Hipotecario BBK I and BBK II, AyT CGH Caixa Galicia II
September 2015 for AyT CGH Caja Cantabria I
November 2015 for AyT CGH CCM I