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Fitch Affirms all Classes of Notes Issued By Finsbury Square 2016-1 Plc
April 24, 2017 / 1:20 PM / 7 months ago

Fitch Affirms all Classes of Notes Issued By Finsbury Square 2016-1 Plc

(The following statement was released by the rating agency) LONDON, April 24 (Fitch) Fitch Ratings has affirmed all classes of notes issued by Finsbury Square 2016-1 Plc with a Positive Outlook applied to all classes of mortgage-backed notes currently rated below 'AAAsf'. The transaction has demonstrated strong performance since closing, with no loans in the asset pool being subject to foreclosure since issuance. In addition, arrears have remained low with three loans representing 0.14% of the collateral balance being in arrears by 90 days or more. Fitch considers that this performance, if continued, could lead to upgrades of all classes of the mortgage-backed notes other than the class A. KEY RATING DRIVERS Near-Prime Mortgages Fitch believes Kensington's underwriting practices are robust and the lending criteria does not allow for any adverse credit 24 months before application. Kensington has a manual approach to underwriting, focusing on borrowers with some form of adverse credit and/or complex income. Historical book-level performance data displays robust performance, although data is limited, especially for BTL originations. Fitch assigned default probabilities using the prime default matrix while applying an upward lender adjustment. Adverse Credit The number of county court judgments (CCJs) in the portfolio, which was 12.8% at closing, is high compared with transactions classified by Fitch as prime. Fitch has applied an upward adjustment to the default probability for these characteristics in line with its criteria. Unrated Originator and Seller The originator and seller are unrated entities and so may have limited resources to repurchase mortgages if there is a breach of the representations and warranties (RW). This is a risk, but there are a number of mitigating factors, such as a low occurrence of previous breaches of the RW and a third-party AUP report provided at closing, which indicated no adverse findings material to the rating analysis. RATING SENSITIVITIES The loans in the pool currently earn a predominantly fixed rate of interest and all revert to an interest rate linked to Libor; once this has occurred, the borrower will be exposed to increases in market interest rates which would put pressure on affordability and potentially cause a deterioration of asset performance. Should this result in defaults and losses on properties sold in excess of Fitch's expectations, Fitch may take negative rating action on the notes. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch 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 pool and the transaction. There were no findings that affected the rating analysis. Prior to the transaction closing, Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis. Prior to the transaction closing, Fitch conducted a review of a small targeted sample of Kensington's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. 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 the analysis. ? Loan-by-loan data provided by Kensington Mortgage Company Limited as at 16 February 2017. ? Transaction reporting provided by Wells Fargo Bank International as at 15 February 2017. MODELS The models below were used in the analysis. Click on the link for a description of the model. <a href="https://www.fitchratings.com/site/structuredfinance/rmbs/resiemea "> ResiEMEA. <a href="https://www.fitchratings.com/site/structuredfinance/rmbs/emearsm "> EMEA RMBS Surveillance Model. <a href="https://www.fitchratings.com/site/structuredfinance/emeacfm ">EMEA Cash Flow Model. Fitch has taken the following rating actions: Class A affirmed at 'AAAsf'; Outlook Stable Class B affirmed at 'AAsf'; Outlook Positive Class C affirmed at 'Asf'; Outlook Positive Class D affirmed at 'BBBsf'; Outlook Positive Class X affirmed at 'BBsf'; Outlook Stable Contacts: Primary Analyst Duncan Paxman Director +44 203 530 1428 Fitch Ratings Limited 30 North Colonnade, London, E14 5GN Committee Chairperson Robbie Sargent Senior Director +44 203 530 1404 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Criteria Addendum: UK Residential Mortgage Assumptions (pub. 03 Feb 2017) here EMEA RMBS Rating Criteria (pub. 29 Nov 2016) here Global Structured Finance Rating Criteria (pub. 27 Jun 2016) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 20 Mar 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 20 Mar 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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