OREANDA-NEWS. Fitch Ratings has affirmed all tranches of the Preferred Residential Securities (PRS) RMBS series and four Residential Mortgage Securities (RMS) transactions. The transactions are comprised of UK non-conforming residential mortgages. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Stable Asset Performance

The asset performance has remained stable over the past 12 months with signs of arrears levels decreasing throughout 2015 across all transactions. In Fitch's opinion, this is mainly a result of the continued low interest rate environment, which is supporting borrower affordability.

With regards to the PRS series, in terms of three month plus arrears, the PRS transactions averaged around 20% of the outstanding pool balance over the course of 2015. RMS 26 has been the strongest performer with three month plus arrears over the past year averaging around 3%. This is mainly due to the fact that the pool was seasoned at around 77 months when the transaction closed. RMS 20 has been the weakest performer, with three month plus arrears averaging 19%. The Fitch UK Non-Conforming Index has averaged around 10% over the same period.

Credit Enhancement (CE) Build-Up

All PRS transactions continue to pay down sequentially due to pro-rata amortisation trigger breaches. Coupled with non-amortising reserve funds, this has allowed a continued build up in CE for the rated notes. After conducting its analysis, Fitch concluded that CE was sufficient enough to withstand higher rating stresses resulting in the affirmations.

RMS 26 pays down sequentially and as such, this has allowed a continued build up in CE. All other RMS transactions are currently paying down pro rata due to the arrears triggers reversing and so long as this trigger remains performing, future CE build-up will be limited. However, after conducting its analysis, Fitch concluded that CE was sufficient enough to withstand higher rating stresses resulting in affirmations.

Standard Variable Loans (SVR) Risks Modelled
The majority of the assets are linked to SVR. In line with its criteria, Fitch has applied a haircut to the available excess spread in the transactions. The analysis showed that even with reduced excess spread, the current credit enhancement was sufficient to withstand the stress.

Counterparty Remedial Action

Deutsche Bank AG (DB) (A-/F1) is the interest rate swap provider on RMS 26. Following the downgrade of its long-term rating to 'A-' in December 2015, Fitch understands from Kensington Mortgage Company that DB has been posting collateral at the account bank in line with Fitch's criteria, as defined in the Credit Support Annex. As such, DB remains eligible to support 'AAAsf' note ratings in RMS 26.

RATING SENSITIVITIES

Interest Rate Environment

In Fitch's opinion, borrower affordability is being supported by the low interest rate environment. This is evidenced by declining three month plus arrears balances across the transactions. However, low constant prepayment rates suggest that borrowers have been unable to refinance, leaving performance of the pools highly sensitive to future interest increases.

Tail Risk

PRS 05-1, PRS 05-2 and PRS 8 have fewer than 700 borrowers remaining in their pools. The small borrower count could lead to a de-stabilisation in pool performance limiting any future upgrades.

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.

RMS 26

Prior to the transaction 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.

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 following information below was used in the analysis:
--Loan-by-loan data provided by Acenden as at 30 November 2015
--Transaction reporting provided by Acenden as at 14 December 2015
--Loan enforcement details provided by Acenden as at 14 December 2015
--Loan-by-loan data provided by Kensington Mortgages Limited as at 31 October 2015
--Transaction reporting provided by Kensington Mortgages Limited as at 22 February 2016
--Loan enforcement details provided by Kensington Mortgages Limited as at 31 January
--Collateral posting information provided by Kensington Mortgages Limited as at 22 March 2016