Oct 1 - Fitch Ratings has assigned Brass No 2 plc's RMBS notes final ratings, as follows:
Class A1: GBP600,000,000 floating-rate notes: 'AAAsf', Stable Outlook
Class A2: GBP600,000,000 floating-rate notes: 'AAAsf', Stable Outlook
Class Z VFN: GBP500,000,000 floating-rate notes: Not rated, of which GBP154,315,000 have been subscribed at closing date
The ratings are based on Fitch's assessment of the underlying collateral, available credit enhancement (CE), the origination and underwriting procedures used by Accord Mortgages Limited (a wholly owned subsidiary of Yorkshire Building Society ('BBB+'/Stable/'F2')), its servicing capabilities and the transaction's sound legal structure. CE for the class A notes initially totals 11.7%, which is provided by the subordination of the subscribed class Z VFN notes (9.0%), as well as a fully funded reserve account of 2.7%, which has been funded by the class Z VFN notes. The notes represent the second standalone pass-through UK RMBS issuance under the Brass series.
The agency has compared the performance of loans originated by Accord Mortgages Limited, which meet the eligibility criteria for Brass No.2 Plc, with Fitch's UK prime three months-plus arrears index and other similar statistics from other UK prime lenders. The agency considers that the performance of Accord's eligible loans is commensurate with that of other UK prime lenders.
To analyse CE levels, Fitch evaluated the collateral using its default model, details of which can be found in the reports referenced below. Accord provided Fitch with a loan-by-loan data template. The data quality and availability was solid, with no material data fields missing. The most relevant pool characteristics (as of 30 September 2012) are outlined below.
Of the loans in the pool at closing, approximately 97.6% are fixed-rate or floating bank base rate loans. At the end of their remaining average teaser period of one to two years, all loans will start paying an interest rate linked to the standard variable rate (SVR) set by Accord, which is currently above market average (5.99%). Fitch has factored in a potential payment shock for borrowers derived from reversion to SVR by applying a lender adjustment hit of 1.15.
Fitch received repossession information for 3,283 loans originated by Accord Mortgages Limited, which it used to validate its quick sale adjustment assumption of 22%.
Of the loans in the pool at closing, approximately 30.1% have at least one interest only part (IO loans). The agency has adjusted the probability of default of all IO loans upward by 30% to account for the balloon payment risk associated with these types of loans in its default assumptions.
Fitch modelled the transaction cash flows using default and loss severity assumptions indicated by the default model under various recession timings, prepayment speeds, interest rates and originator default scenarios. The cash flow tests showed that the rated class of notes could withstand loan losses at a level corresponding to the related stress scenario without incurring any principal loss or interest shortfall and can retire principal by legal final maturity.
Fitch's stress and rating sensitivity analysis is detailed in the new issue report, which will shortly be available at
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Additional information is available at
The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The source of information identified for this rating action was informed by information from Accord Mortgages Limited and their legal advisors Allen & Overy LLP and Tods Muarry LLP.
Applicable criteria, 'Global Structured Finance Rating Criteria', dated 6 June 2012, 'EMEA Master Rating Criteria' dated 7 June 2012, 'Counterparty Criteria for Structured Finance Transactions', dated 30 May 2012, 'Counterparty Criteria for Structured Finance Transactions: Derivative Addendum', dated 30 May 2012, 'EMEA Residential Mortgage Loss Criteria' dated 7 June 2012, 'EMEA RMBS Cash Flow Analysis Criteria' dated 7 June 2012, 'EMEA Criteria Addendum - United Kingdom - Mortgage Loss and Cash Flow Assumptions', dated 9 August 2012 are available at
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Counterparty Criteria for Structured Finance Transactions
Counterparty Criteria for Structured Finance Transactions: Derivative Addendum
EMEA Residential Mortgage Loss Criteria
EMEA RMBS Cash Flow Analysis Criteria
EMEA Criteria Addendum - United Kingdom - Mortgage and Cashflow Assumptions
(New York Ratings Team)