OREANDA-NEWS. Fitch Ratings has affirmed Fosse Master Issuer plc, a master trust programme of residential mortgage loans originated by Santander UK plc (A/Positive/F1). A full list of rating actions is available at the end of this rating action commentary.

KEY RATING DRIVERS
Strong Asset Performance
At end-January 2016, loans in arrears by three months or more stood at around 0.8% of the pool balance, compared with the Fitch Master Trust Index at around 0.9%. The transaction has consistently outperformed the index throughout its life and this is despite Santander not having repurchased loans in arrears by two months or more, unlike other trusts in the sector. Such repurchases have been routine on Holmes Master Issuer plc, another Santander master trust; however, the absence of this practice has had a minimal effect on Fosse's performance because the arrears levels have remained low without intervention.

Robust Credit Enhancement (CE)
Since the last issuance in March 2015, CE has increased by around two percentage points. There has been significant amortisation of the senior notes, along with the class Z notes having amortised by around GBP380m and the reserve fund being reduced to GBP100m, from GBP324m, as scheduled in the transaction documents. Despite the class Z note amortisations and the reduction in the reserve fund, the available CE is more than sufficient to withstand Fitch's stresses, resulting in today's affirmation.

SVR/BBR Risks Modelled
The standard variable rate (SVR) element of the transactions' interest-rate swap is calculated with respect to a basket of SVR mortgage rates charged by a number of leading UK mortgage lenders to their existing customers, rather than Santander's SVR. Consequently, there is hedging risk between the basket SVR and Santander's variable rate. Furthermore, a haircut to the Bank of England base rate (BBR) margins has been applied in line with Fitch's criteria. As of end-January 2016, SVR loans and BBR made up around 30% and 70% of the pool, respectively. After factoring these elements into its analysis, Fitch has concluded that the rated notes have sufficient CE to affirm the ratings.

RATING SENSITIVITIES
Although there has been a build-up in CE for the rated notes since the last issuance, it could decrease if new notes are issued. With the seller share currently above the required amount, Santander has flexibility to adjust the future capital structure, which could reduce CE. Nevertheless, the current CE makes the ratings resilient to even extreme stresses.

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.

Fosse Master Issuer plc 2010-1 and 2010-3
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.

Fosse Master Issuer plc 2011-1, 2011-2, 2012-1, 2014-1 and 2015-1
Prior to the transactions' 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.

Fosse Master Issuer plc 2011-2, 2012-1, 2014-1 and 2015-1
Prior to the transaction's 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 Santander as at 31 January 2016
-Transaction reporting provided by Santander as at 31 January 2016
-Loan enforcement details provided by Santander as at 31 January 2016

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

ResiEMEA.

EMEA RMBS Surveillance Model.

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (Fosse Master Issuer plc - Series 2012-1 - Appendix, dated 23 May 2012, Fosse Master Issuer plc - Series 2014-1 - Appendix, dated 27 October 2014 and Fosse Master Issuer plc - Series 2015-1 - Appendix, dated 16 March 2015 at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.

Fitch has affirmed the following ratings:
Fosse Master Issuer plc - Series 2010-1
Class A3 (ISIN XS0493854631): affirmed at AAAsf'; Outlook Stable

Fosse Master Issuer plc - Series 2010-3
Class A3 (ISIN XS0525764071): affirmed at AAAsf'; Outlook Stable

Fosse Master Issuer plc - Series 2011-1
Class A5 (ISIN XS0630101979): affirmed at AAAsf'; Outlook Stable
Class A6 (ISIN XS0630105533): affirmed at AAAsf'; Outlook Stable
Class A7 (ISIN XS0630111853): affirmed at AAAsf'; Outlook Stable

Fosse Master Issuer plc - Series 2011-2
Class A5 (ISIN XS0715271663): affirmed at AAAsf'; Outlook Stable

Fosse Master Issuer plc - Series 2012-1
Class 3A1 (ISIN XS0784928482): affirmed at AAAsf'; Outlook Stable
Class 3A2 (ISIN XS0784928649): affirmed at AAAsf'; Outlook Stable

Fosse Master Issuer plc - Series 2014-1
Class A2 (ISIN XS1075515061): affirmed at AAAsf'; Outlook Stable

Fosse Master Issuer plc - Series 2015-1
Class A2 (ISIN XS1207302826): affirmed at AAAsf'; Outlook Stable
Class A3 (ISIN XS1207307205): affirmed at AAAsf'; Outlook Stable