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���������ֳ�-London-25 November 2013: ���������ֳ� has upgraded 15 and affirmed 90 tranches of 16 UK non-conforming RMBS transactions, including the Southern Pacific Financing (SPF), Southern Pacific Securities (SPS), Preferred and Marble Arch (MARS) series and Cambric Finance Number One plc (Cambric). A full list of ratings actions is available at or by clicking on the link above.

KEY RATING DRIVERS
The upgrade of 15 tranches across the MARS4, SPS and SPF series reflects the robust build-up in credit enhancement (CE) for these tranches, which has doubled since closing. The reserve fund for each of these transactions is fully funded and is either non-amortising or no longer allowed to amortise due to the irreversible breach of the cumulative losses trigger. Coupled with the sequential amortisation of the notes, this is expected to assist the further build-up in CE.

The affirmations reflect the stable performance across the majority of the transactions, in line with other UK non-conforming peers as the current low interest rate environment continues to support borrower affordability.

Stable Performance of Acenden Transactions
SPF, SPS, Preferred, and MARS consist of loans serviced by Acenden Limited (RPS2+/RSS2). Since December 2012, the servicer has reported delinquencies, defined as outstanding contractual monthly instalments of interest and/or interest and principal in line with the rest of the market, in addition to the higher amounts outstanding reported to date, which is calculated assuming cash payments received are first allocated to clearing outstanding fees, cost and other amounts first before clearing arrears, resulting in higher amounts outstanding than actual delinquencies. While amounts outstanding continue to be used to determine the satisfaction of the respective pro-rata triggers, in its analysis ���������ֳ� has used the actual volumes of payment arrears, which currently range between 11% (SPF04A) and 30% (SPS06-1) of the respective current collateral balances.

However, whilst performance trends have not deviated much in recent quarters, the majority of transactions continue to report three-month plus arrears that are higher than the average for other UK non-conforming transactions. ���������ֳ� understands that Acenden also uses loan modifications, typically in the form of arrears capitalisation, in its management of arrears cases and these currently range between 0.1% and 3% of their current balance. Additionally, repossession activities have remained relatively limited for these transactions due to tightening of the lenders' litigation policies.

Nonetheless, reported payment rates, ranging between 90% and 105%, suggest a high propensity for underlying borrowers, especially those in arrears, to meet their monthly mortgage payments. In addition, the slight decline in 120 days+ arrears also suggests that borrowers in late stage arrears are starting to clear outstanding amounts owed. For this reason, ���������ֳ� applied less conservative assumptions in assessing the default rates of loans in arrears for these transactions.

The underlying pools in Preferred 06-1, MARS4, and SPS series comprise between 0.6% (Preferred 06-1) and 14% (MARS4) of second-charge loans, which have contributed towards higher and more volatile loss severities incurred to date, ranging between 8.6% (SPS04-1) and 30.4% (MARS4). However, the subdued levels of foreclosed properties in recent quarters have limited the losses incurred.

Given ���������ֳ�'s expectations of low interest rates until 2015, the agency expects performance trends to remain relatively flat in the next 12 months, as reflected in the Stable Outlooks maintained on 94 tranches.

Small Pool Risk Remains A Concern
Early vintage transactions such as SPF 04-A, SPS 04-1 and SPS 04-2 have paid down to the extent that the respective current pool balances are at 7%, 4.7% and 6.5% of their original balances. The small size of the pools has resulted in insufficient excess spread being generated to cover losses and even the junior class E interest for SPF 04-A, causing reserve fund draws. In its analysis, ���������ֳ� has taken into consideration the concentration risks associated with small pools and presently considers the current credit support levels sufficient to protect against such risks and has thus affirmed the ratings. However, the Outlooks on the most junior tranches of these transactions, specifically the class D and E notes of SPF04A and class B notes of SPS 04-1 have been revised to Negative from Stable, reflecting the volatility of small pools that could lead to higher losses and subsequently further reserve fund draws.

Stable Performance For Cambric
Cambric, which closed in December 2012, currently reports low levels of loan in arrears by more than three months at 0.2% of current pool balance, with limited repossessions incurred to date. For this reason, the ratings have been affirmed.

RATING SENSITIVITIES
���������ֳ� believes that even a modest increase in interest rates will put a strain on borrower affordability, triggering increased arrears and defaults thereafter. Given the weaker profile of the underlying borrowers in these pools, refinancing opportunities are expected to remain limited, leaving the junior tranches exposed to future losses.

For early vintage transactions with small pool balances, deterioration in asset performance of the remaining collateral could lead to downgrades.

The current 'B' Long-Term IDR of Co-operative Bank implies a breach of the minimum 'BBB-' rating threshold defined in the transaction document for Cambric, requiring the issuer to employ reasonable endeavours to appoint both a back-up servicer and a back-up cash manager. The agency understands that appropriate remedial actions are currently being taken and will continue to monitor the progress in complying with the terms of the documentation. If remedial actions are not taken, negative rating actions may be taken.

Contact:
Lead Surveillance Analyst
Jiaxin Huang
Analyst
+44 20 3530 1572
���������ֳ� Limited
30 North Colonnade
London E14 5GN

Secondary Analyst
Grace Yeo
Analyst
+44 20 3530 1486

Committee Chairperson
Gregg Kohansky
Managing Director
+44 20 3530 1376

Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com.

Additional information is available at .

Sources of information - Investor and Servicer Reports and loan-by-loan level data.

Applicable criteria, 'EMEA Residential Mortgage Loss Criteria' dated 6 June 2013, 'EMEA Residential Mortgage Loss Criteria Addendum - United Kingdom' dated 9 August 2012 and 'Global Structured Finance Rating Criteria' dated 24 May 2013, are available at .

Applicable Criteria and Related Research:




Additional Disclosure