OREANDA-NEWS. Fitch Ratings has affirmed five Spanish RMBS transactions. A full list of rating actions is available at the end of this commentary.

The transactions are serviced by Banco Mare Nostrum, S.A. (BB/Stable/B) for AyT Caja Granada Hipotecario 1 and Ayt Caja Murcia Hipotecario I; Liberbank S.A. (BB/Stable/B) for IM Cajastur MBS 1; Banco de Sabadell S.A. for TDA 29 and Bankia, S.A. (BBB/Stable/F3) for VAL Bancaja 1.

KEY RATING DRIVERS
Stable Credit Enhancement
The notes in AyT Caja Granada Hipotecario 1, IM Cajastur MBS 1, TDA 29 and VAL Bancaja are currently paying sequentially (with the exception of AyT Caja Granada) which has allowed credit enhancement (CE) to continue building up. A switch to pro-rata is not expected in the near future as various conditions remain unmet.

AyT Caja Murcia Hipotecario 1 has been paying pro-rata since April 2010, and given the low arrears level we do not expect a reverse to sequential payment in the next 12 months. Consequently, further increases in CE will be restricted, and this limits the scope for positive rating actions despite the solid performance to date.

Overall Fitch considers the CE of the rated notes in these transactions sufficient to withstand the rating stresses leading to the affirmations.

Stable Asset Performance
With the exception of AyT Caja Granada Hipotecario 1, the deals have shown sound asset performance compared with the average Fitch-rated Spanish RMBS. Three-months plus arrears (excluding defaults) as a percentage of the current pool balance range from 0.4% (AyT Caja Murcia Hipotecario) to 1.7% (IM Cajastur). These numbers remain broadly in line with Fitch's index of three-months plus arrears (excluding defaults) of 1.0%. For AyT Caja Granada, three-month arrears have been consistently higher at 4.5%.

Cumulative defaults, defined as mortgages in arrears by more than 18 months (12 months for TDA 29), range from 0.3% (AyT Caja Murcia Hipotecario) to 5.7% (Caja Granada) of original collateral balance, with AyT Caja Granada the only transaction above the sector average of 5.3%. Fitch believes that these levels are likely to rise further in AyT Caja Granada as late-stage arrears roll into the defaulted category. Given the increasing default trend, Fitch has revised the Recovery Estimate for AyT Caja Granada's class C notes to 0% from 10%

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

Commercial Loan Exposure
Fitch notes that around 9% of the current pool balance of IM Cajastur comprises loans granted to SMEs. Fitch applied an additional 200% foreclosure frequency hit to these loans to account for the greater default risk. Fitch also employed its commercial Market Value Decline Matrix to derive the Recovery Rates for this proportion of the pool. Fitch found the current CE sufficient to mitigate the risk.

Reserve Fund Balances
The reserve funds for IM Cajastur and TDA 29 are close to their targets (97% and 88%). However, for AyT Caja Granada the reserve fund remains fully depleted, and the principal deficiency ledgers (PDL) report debits of 6% of the current note balance. Given the increasing growth of defaults in AyT Caja Granada, Fitch believes further PDL debit balances may materialise on the next payment dates. In contrast AyT Caja Murcia and Val Bancaja have fully-funded reserve funds.

Absence of Hedging
Fitch believes the absence of a swap in Val Bancaja exposes the transaction to basis risk, which we have factored into the analysis. Nevertheless, the agency considers the available CE sufficient to withstand the resulting stresses.

Payment Interruption Risk
Fitch considers the reserve fund balance in AyT Caja Murcia, IM Cajastur and VAL Bancaja as well as the dedicated liquidity reserve in AyT Caja Granada sufficient to provide liquidity to cover a number of payments due to the senior noteholders and relevant counterparties in the event of servicer or collection account bank default. In contrast, the current balance of the reserve fund in TDA 29 exposes senior noteholders to payment interruption risk consistent with the low investment-grade ratings. Therefore even if the transaction's performance improves we are unlikely to upgrade the ratings above 'Asf'.

Commingling Exposure
Fitch believes all of the transactions are exposed to commingling loss in the event of default of the collection account bank as there is no certainty regarding the timely cessation of further payments into the commingled accounts. The agency captured this additional stress in its analysis and found the current CE 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.

An underperformance of the loans that have been granted maturity extensions in both AyT deals may lead to negative rating actions.

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 Fitch analysis.

Loan-by-loan data obtained from the European Data Warehouse with a cut-off date of
01 December 2015 for AyT Caja Granada Hipotecario I
11 January 2016 for AyT Caja Murcia Hipotecario I
31 October 2015 for TDA 29
18 November 2015 for Val Bancaja
31 December 2015 for IM Cajastur

Transaction reporting provided by:
Haya Titulizacion SGFT S.A. as of:
December 2015 for AyT Caja Granada Hipotecario I
January 2016 for AyT Caja Murcia Hipotecario I

InterMoney Titulizacion as of :
December 2015 for IM Cajastur MBS I

Titulizacion de Activos as of:
November 2015 for TDA 29

Europea de Titulizacion as of:
November 2015 for Val Bancaja

The rating actions are as follows:

AyT Caja Granada Hipotecario 1:
Class A notes (ISIN ES0312212006): affirmed at 'Asf'; Outlook Stable
Class B notes (ISIN ES0312212014): affirmed at 'CCCsf'; Recovery Estimate 95%
Class C notes (ISIN ES0312212022): affirmed at 'CCsf'; Recovery Estimate revised to 0% from 10%
Class D notes (ISIN ES0312212030): affirmed at 'CCsf'; Recovery Estimate 0%

AyT Caja Murcia Hipotecario I:
Class A notes (ISIN ES0312282009): affirmed at 'AA-sf'; Outlook Stable
Class B notes (ISIN ES0312282017): affirmed at 'Asf'; Outlook Stable
Class C notes (ISIN ES0312282025): affirmed at 'BB+sf'; Outlook Stable

IM Cajastur MBS 1:
Class A notes (ISIN ES0347458004): affirmed at 'A+sf'; Outlook Stable
Class B notes (ISIN ES0347458012): affirmed at 'BBB+sf'; Outlook Stable

TDA 29:
Class A2 notes (ISIN ES0377931011): affirmed at 'BBBsf'; Outlook Stable
Class B notes (ISIN ES0377931029): affirmed at 'Bsf'; Outlook Stable
Class C notes (ISIN ES0377931037): affirmed at 'CCCsf'; Recovery Estimate 65%
Class D notes (ISIN ES0377931045): affirmed at 'CCsf'; Recovery Estimate 0%

VAL Bancaja 1:
Class A2 notes (ISIN ES0339721013): affirmed at 'A+sf'; Outlook Stable
Class B notes (ISIN ES0339721021): affirmed at 'Asf'; Outlook Stable
Class C notes (ISIN ES0339721039): affirmed at 'BBB+sf'; Outlook Stable