OREANDA-NEWS. Fitch Ratings has affirmed three Leek UK RMBS transactions. 

The transactions are securitisations of non-conforming UK residential mortgages originated primarily in 2005 and 2006 by Platform Funding Limited, a wholly owned subsidiary of The Co-operative Bank (B/Stable/B).

KEY RATING DRIVERS
Credit Enhancement From Gilts
Following the restructuring in 2011, the issuer purchased gilts to increase the credit enhancement available to the rated notes. The gilts currently provide 36%-37% enhancement across the three transactions. The securities are currently held with JPMorgan Chase (AA-/Stable/F1+). The ratings of the B-C notes in Leek 17 and 18 and M-D notes in Leek 19 are driven by the support provided by the gilts. As such their ratings are capped at the UK government rating of 'AA+'.

Loss Severities
There have been loss severities of 2%-33% across the three transactions. Fitch has adjusted the quick sale adjustment (QSA) applied in the asset analysis accordingly in each transaction such that the recovery rate in the expected case reflects the loss severities observed.

Stable Arrears Performance
Post-crisis, late stage arrears (currently 3.8-4.7%) have outperformed the non-conforming index (currently 9.4%). This reflects the roughly 50/50 split between prime and non-prime loans in the transactions.

Unhedged Basis Risk
Approximately 70% of the loans in each transaction track the BBR. The mismatch between the BBR and 3m LIBOR payable on the notes is unhedged. To account for the basis risk, credit given to the excess spread has been reduced for the proportion of BBR loans. The reduction at the 'AAAsf' and 'AAsf' level is 200bps for the first year of credit given, and an additional 50bps for each subsequent year.

RATING SENSITIVITIES
Some of the non-senior tranches are exposed to UK sovereign risk resulting from the credit enhancement provided by the gilts.
Given the high proportion of non-conforming and interest-only loans in the portfolios the transaction is exposed to both relatively weak asset performance as well as balloon risk at the point of maturity of the I/O loans. Adverse asset performance may erode the credit enhancement available to the notes leading to negative rating actions.

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 provided by The Co-operative Bank as at 30 November 2015
- Transaction reporting provided by Platform Funding Limited as at 30 November 2015
- Discussions/updates provided by The Co-operative Bank as at 26 February 2016