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Mansard Mortgages 2007-2 PLC Nonconforming RMBS Ratings Affirmed

Overview

  • Following our review of Mansard Mortgages 2007-2, we have affirmed our ratings on all classes of notes.
  • The transaction is backed by a pool of buy-to-let and nonconforming mortgage loans on properties in the U.K. and originated by Rooftop Mortgages.

LONDON (S&P Global Ratings) Nov. 9, 2023--S&P Global Ratings affirmed its 'A+ (sf)' credit ratings on Mansard Mortgages 2007-2 PLC's class A1a, A2a, M1a, and M2a notes, 'A (sf)' rating on the class B1a notes, and 'BBB+ (sf)' rating on the class B2a notes.

Today's affirmations reflect that while there has been a significant increase in loan-level arrears since closing, there has been a relatively high level of prepayments in this transaction, resulting in increased credit enhancement for the outstanding notes.

The performance of the loans in the collateral pool has deteriorated since our previous full review in November 2021 (see "Related Research"). Based on our calculation methodology, total arrears increased to 17.1% from 9.1% between the September 2022 and June 2023 cutoff dates. This has resulted in a increase in our weighted-average foreclosure frequency (WAFF) at all rating levels. Our weighted-average loss severity (WALS) assumptions have decreased at all rating levels, mainly due to a lower weighted-average current loan-to-value (LTV) ratio.

The overall effect from our credit analysis results is an increase in the required credit coverage at all rating levels

Mansard 2007-2 PLC
Rating level WAFF (%) WALS (%)
AAA 42.80 39.06
AA 35.32 31.21
A 31.12 18.87
BBB 26.68 11.69
BB 21.49 7.15
B 20.33 4.14
WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity.

Both the liquidity facility and the reserve fund are at their required levels and are nonamortizing.

Barclays Bank PLC is the guaranteed investment contract (GIC) account provider for Mansard Mortgages 2007-2. Under our counterparty criteria, our ratings on these notes are capped at our 'A+' long-term issuer credit rating (ICR) on Barclays Bank PLC following its loss of an 'A-1' short-term rating and failure to take remedy action.

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 global residential loans criteria.

Macroeconomic forecasts and forward-looking analysis

We expect U.K. inflation to remain high for the rest of 2023 and forecast the year-on-year change in house prices in fourth-quarter 2023 to be 6.6% and 4.9% in first-quarter 2024 (see "European Housing Markets: Sustained Correction Ahead," published on July 20, 2023). Although high inflation is overall credit negative for all borrowers, inevitably some borrowers will be more negatively affected than others, and to the extent inflationary pressures materialize more quickly or more severely than currently expected, risks may emerge.

We consider the borrowers to be nonconforming and as such are generally less resilient to inflationary pressure than prime borrowers.

Given our current macroeconomic forecasts and forward-looking view of the U.K. residential mortgage market, we performed additional sensitivities related to higher levels of defaults due to increased arrears and house price declines. We have also performed additional sensitivities with extended recovery timing due to observed delays to repossession owning to court backlogs in the U.K. and the recent repossession grace period announced by the U.K. government under the Mortgage Charter.

Our credit and cash flow results for the class A1a, A2a, M1a, and M2a notes indicate that these notes could withstand our stresses at higher ratings than those assigned. However, the ratings are capped at our 'A+' long-term ICR on the GIC account provider. We have therefore affirmed our 'A+ (sf)' ratings on the class A1a, A2a, M1a, and M2a notes.

Under our credit and cash flow analysis, the class B1a and B2a notes could withstand our stresses at a higher rating than that assigned. However, these ratings are constrained by additional factors that we considered. We considered the relative position of these classes of notes in the capital structure and the lower credit enhancement for the subordinated classes compared with that of the senior notes. We have therefore affirmed our 'A (sf)' and 'BBB+ (sf)' ratings on the class B1a and B2a notes, respectively.

Counterparty, operational, and legal risks are adequately mitigated in line with our criteria.

Related Criteria

Related Research

Primary Credit Analyst:Abhijit A Pawar, London + 44 20 7176 3774;
abhijit.pawar@spglobal.com
Secondary Contacts:Pratish Dcruz, London +44 2071766749;
pratish.dcruz@spglobal.com
Vedant Thakur, London + 44 20 7176 3909;
vedant.thakur@spglobal.com
Research Contributor:Vigneesh Iyer, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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