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Various Rating Actions Taken On Landmark Mortgage Securities No. 1’s U.K. Nonconforming RMBS Notes

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Various Rating Actions Taken On Landmark Mortgage Securities No. 1’s U.K. Nonconforming RMBS Notes

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

Related Research

Primary Credit Analyst:Arnaud Checconi, London (44) 20-7176-3410;
ChecconiA@spglobal.com

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