Overview
- On May 6, 2020, we placed on CreditWatch negative our rating on Landmark Mortgage Securities No. 1's class D notes.
- Following our review under our relevant criteria, we have taken various rating actions in this transaction.
- Landmark Mortgage Securities No. 1 is a U.K. nonconforming RMBS transaction originated by Unity Homeloans Ltd., Infinity Mortgages Ltd., and Amber Homeloans Ltd.
LONDON (S&P Global Ratings) July 3, 2020--S&P Global Ratings today took the following rating actions:
- Lowered and removed from CreditWatch negative its credit rating on Landmark Mortgage Securities 1's class D notes; and
- Affirmed all other classes of notes.
Today's rating actions follow our May 6, 2020, CreditWatch negative placement of our ratings on the class D notes (see "17 Ratings From Spanish, Portuguese, Dutch, And U.K. RMBS Transactions Placed On Watch Negative"). Our review reflects the application of our relevant criteria and our full analysis of the most recent transaction information that we have received, and considers the transaction's current structural features (see "Related Criteria").
We have also considered our updated market outlooks and additional COVID-19 stresses to account for the current macroeconomic environment (see "Residential Mortgage Market Outlooks Updated For 13 European Jurisdictions Following Revised Economic Forecasts," published on May 1, 2020). In addition to applying increased base foreclosure frequencies at the 'B' to 'AA+' ratings, we have stressed payment holidays on 25% of collections received over the first six months and delayed the time to recovery by six and 12 months as part of our analysis of this transaction.
Barclays Bank is the cross-currency counterparty for Landmark 1. Under our counterparty criteria, our ratings on these notes are capped at our 'A+' recovery credit rating (RCR) on Barclays Bank given its collateral framework and legal documentation.
After applying our U.K. RMBS criteria assumptions, the overall effect in our credit analysis results in an increase in the weighted-average foreclosure frequency (WAFF) at all rating levels except at the 'AAA' level. This is mainly due to the higher base foreclosure frequencies compared to our last review. Our weighted-average loss severity (WALS) assumptions have decreased slightly at all rating levels mainly due to lower weighted-average current loan-to-value (LTV) ratio.
The overall effect from our credit analysis results is a decrease in the required credit coverage for rating levels of 'BB' and above.
WAFF And WALS | ||
---|---|---|
Rating level | WAFF (%) | WALS (%) |
AAA | 40.62 | 36.43 |
AA | 35.30 | 27.85 |
A | 32.24 | 14.27 |
BBB | 28.36 | 7.63 |
BB | 23.83 | 3.93 |
B | 22.80 | 2.00 |
Available credit enhancement in this transaction has increased since our previous review, due to the sequential priority of payments and the nonamortizing reserve fund.
The liquidity facility is nonamortizing. It was drawn to cash upon the liquidity facility provider's (Barclays Bank) loss of the required rating.
Since our last review, medium- and long-term total delinquencies have slightly increased to 3.8% and 11.5% from 2.9% and 10.2% respectively. The cumulative losses are at about 4%.
Following the application of our criteria, we have determined that our assigned ratings on this transaction's classes of notes should be the lower of (i) the rating as capped by our counterparty criteria, or (ii) the rating that the class of notes can attain under our U.K. RMBS criteria.
Our credit and cash flow results for the class Aa, Ac, B, Ca, and Cc notes indicate that these notes could withstand our stresses at higher rating levels than those assigned. However, the ratings are capped at our 'A+' RCR on the cross-currency provider. We have therefore affirmed our 'A+ (sf)' ratings on the class Aa, Ac, B, Ca, and Cc notes.
We have lowered to 'B- (sf)' from 'B (sf)' and removed from CreditWatch negative our rating on the class D notes. In our cash flow analysis, these notes did not pass our 'B' rating level cash flow stresses in our standard and sensitivity runs, including payment holidays, arrears projection, extended recoveries, and forced pro rata. Therefore, we applied our 'CCC' ratings criteria to assess if either a 'B-' rating or a rating in the 'CCC' category would be appropriate (see "Related Criteria"). We performed a qualitative assessment of the key variables, together with an analysis of performance and market data, and we believe that the class D notes will be able to pay timely interest and ultimate principal in a steady-state scenario commensurate with a 'B-' stress in accordance with our 'CCC' ratings criteria.
Landmark 1 was issued in July 2006.
Related Criteria
- Criteria | Structured Finance | General: Methodology To Derive Stressed Interest Rates In Structured Finance, Oct. 18, 2019
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Criteria | Structured Finance | RMBS: Global Methodology And Assumptions: Assessing Pools Of Residential Loans, Jan. 25, 2019
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria | Structured Finance | General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- Criteria | Structured Finance | General: Global Derivative Agreement Criteria, June 24, 2013
- General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012
- Criteria | Structured Finance | General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- General Criteria: Methodology: Credit Stability Criteria, May 3, 2010
- General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009
- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009
Related Research
- U.K. RMBS Index Report Q1 2020, May 29, 2020
- 17 Ratings From Spanish, Portuguese, Dutch, And U.K. RMBS Transactions Placed On Watch Negative, May 6, 2020
- European Economic Snapshots: Larger Risks To Growth Loom Ahead, May 5, 2020
- Residential Mortgage Market Outlooks Updated For 13 European Jurisdictions Following Revised Economic Forecasts, May 1, 2020
- S&P Global Ratings Is Assessing The Impact Of COVID-19 On Mortgage Market Outlooks For Global RMBS, April 17, 2020
- Economic Research: Europe Braces For A Deeper Recession In 2020, April 20, 2020
- Various Rating Actions Taken In Three Mansard Mortgages RMBS Transactions Following Review, Nov. 11, 2019
- 2017 EMEA RMBS Scenario And Sensitivity Analysis, July 6, 2017
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
Primary Credit Analyst: | Arnaud Checconi, London (44) 20-7176-3410; ChecconiA@spglobal.com |
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