Various Rating Actions Taken In U.K. Nonconforming RMBS Transaction Ludgate Funding#s Series 2007-FF1 After Review

Stocks and Financial Services Press Releases Thursday May 17, 2018 16:47
LONDON--17 May--S&P Global Ratings

LONDON (S&P Global Ratings) May 17, 2018--S&P Global Ratings today raised its credit ratings on Ludgate Funding PLC series 2007-FF1's class Bb, Cb, Da, Db, and E notes. At the same time, we affirmed our ratings on the class A2a, A2b, Ma, and Mb notes (see the list below).

Today's rating actions follow our credit and cash flow analysis of the transaction using information from the April 2018 investor report and March 2018 loan-level data. Our analysis reflects the application of our European residential loans criteria and our current counterparty criteria (see "Criteria - Structured Finance - General: Methodology And Assumptions: Assessing Pools Of European Residential Loans," published on Aug. 4, 2017, and "Criteria - Structured Finance - General: Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013).

In our opinion, the performance of the loans in the collateral pool has remained stable since our previous full review (see "Various Rating Actions Taken In U.K. Nonconforming RMBS Transaction Ludgate Funding's Series 2007-FF1 Following Review," published on Jan. 30, 2017). Total delinquencies have increased moderately to 4.4% from 3.7%, whereas delinquencies of 90 or more days remained stable at 1.8%. Repossessions as a percentage of the original balance remained unchanged at 0.4%. The overall stable performance of the collateral is in line with the evolution observed in our U.K. nonconforming residential mortgage-backed securities (RMBS) index (see "U.K. RMBS Index Report Q4 2017," published on March 1, 2018). Prepayments have decreased since our previous review to 7.6% as of April 2018 from 8.6%, which is slightly higher than the 7.3% observed in our index.

The greater proportion of the loans in the pool receiving the maximum seasoning credit benefitted our weighted-average foreclosure frequency (WAFF) calculations. Our weighted-average loss severity (WALS) assumptions have decreased at all rating levels, due to the decrease in the weighted-average current loan-to-value ratio resulting from loan repayments and increased house prices.

Rating WAFF WALS
(%) (%)
AAA 27.07 47.61
AA 19.28 40.08
A 14.63 26.96
BBB 10.41 18.97
BB 6.17 13.30
B 4.84 8.96
The notes benefit from a liquidity facility and a reserve fund. The facilities are not amortizing, given that the respective cumulative loss triggers have been breached.
The structure started amortizing pro rata in October 2016 because all of the pro rata triggers are currently met. We have considered this in our cash flow analysis.

We consider the available credit enhancement for the class Bb, Cb, Da, Db, and E notes to be commensurate with higher ratings than those currently assigned. We have therefore raised our ratings on these classes of notes.

In our credit and cash flow analysis, we consider the available credit enhancement for the class A2a, A2b, Ma, and Mb notes to be commensurate with higher ratings than those currently assigned. However, the 'A-2' rating trigger, which was amended in the transaction documents in 2017 in relation to bank accounts with limited exposure, caps the maximum potential rating on the notes in this transaction at our 'A' long-term issuer credit rating on Qatar National Bank (A/Negative/A-1) as guaranteed investment contract provider, as per our current counterparty criteria. We have therefore affirmed our 'A (sf)' ratings on the class A2a, A2b, Ma, and Mb notes.

Ludgate Funding's series 2007-FF1 is a U.K. nonconforming RMBS transaction with collateral comprising a pool of first-ranking mortgages over freehold and leasehold properties.

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