OREANDA-NEWS. Fitch Ratings has assigned Gosforth 2015-1 plc's notes the following ratings:

Class A1: 'AAAsf', Outlook Stable
Class A2: 'AAAsf', Outlook Stable
Class M: 'AAsf', Outlook Stable
Class Z: not rated

The transaction is a securitisation of prime residential owner-occupied mortgages originated by Virgin Money plc (VM; BBB+/Stable/F2) and NRAM plc in England, Wales and Scotland. This is the fifth issuance from the Gosforth series since 2011. VM will service the loans and Homeloan Management Limited is named as back-up administrator.

The ratings reflect the credit enhancement available for each class of rated notes. Credit enhancement for the class A notes is 11.9%, provided by the subordination of the class M notes (4%), the unrated class Z notes (6%), the reserve fund (1.9%), and excess spread.

KEY RATING DRIVERS

Prime Portfolio
The portfolio has a weighted average (WA) seasoning of 26 months, a WA sustainable loan-to-value ratio (SLTV) of 76.5% and WA debt to income (DTI) of 43.7%. The WA SLTV and WA DTI are below the average for UK prime transactions rated by Fitch.

Revolving Transaction
A five-year revolving period allows new assets to be added to the portfolio. Fitch considers the replenishment criteria as helping to mitigate any significant risks from the potential migration of the portfolio's credit profile. Nonetheless, Fitch has assumed changes to the portfolio characteristics in line with the replenishment criteria listed in the transaction documentation.

Basis Risk Hedged
The basis risk is hedged through a swap provided by VM, with Lloyds Bank plc (A+/Stable/F1) acting as standby swap provider. A failure to pay or an insolvency of the initial basis swap provider will result in the standby swap replacing the initial basis swap for the fixed and BBR-linked loans only.

Class A1 Scheduled Amortisation
Principal for the class A1 notes is paid in the first instance according to a target scheduled amortisation. Any excess principal collections are paid to the seller. The issuer will be allocated the lower of principal amounts due to noteholders or all trustee available principal receipts. If the principal collections are not enough to meet the target scheduled amortisation then the amounts due will be carried forward.

Non 'A'/'F1' Counterparties
Two account bank providers, Lloyds (collection account bank) and VM (VM Mortgages Trustee account bank) do not have 'A'/'F1' counterparty replacement triggers as part of Fitch's criteria. Fitch has assumed a total loss of two months of scheduled principal and interest to account for funds lost in case of insolvency for either of the banks.

RATING SENSITIVITIES

Material increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels greater than Fitch's base case expectations, which in turn may result in rating actions on the notes. Fitch's analysis revealed that a 30% increase in the WA foreclosure frequency along with a 30% decrease in the WA recovery rate would result in a model-implied downgrade of the class A notes to 'A+sf'

More detailed model implied ratings sensitivity can be found in the new issue report, which is available at www.fitchratings.com.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

The mortgages in the pool were either originated by VM after 2010 or by NRAM before being transferred to VM in January 2010. VM was unable to provide performance data for NRAM-originated loans before the transfer but provided three months-plus arrears information by vintage on the assets from the date of transfer, and performance data covering VM-originated assets.

The performance of NRAM-originated loans from previous Gosforth transactions has been in line with comparable prime UK transactions rated by Fitch and provides sufficient comfort for this lack of data. VM confirmed that all NRAM-originated loans within the portfolio were at least six months seasoned and performing in the 12 months prior to the transfer to VM; no adjustment was applied.

VM were unable to provide confirmation on a small percentage of borrowers regarding county court judgements and bankruptcy order/individual voluntary arrangements at the point of origination (0.56% and 1.58%, respectively).

Furthermore, VM was unable to confirm whether 93.2% of the borrowers in the portfolio had prior mortgage or rent arrears in the 12 months prior to loan origination. Although it is unlikely that borrowers with prior arrears may have been accepted given the relevant lending criteria relating to the mortgage loans within the portfolio, the agency has assumed 5% of these loans had one month's prior mortgage arrears in the 12 months prior to origination. Fitch further applied a 20% adjustment to the assumed 5% in line with its criteria where borrowers have missed a mortgage payment greater than six months but less than 12 months prior to origination.

VM provided repossession data on 224 cases, of which 209 had sufficient data to calculate a quick sale adjustment of 19% for houses and bungalows and 30% for flats. This is higher than the UK criteria of 17% for houses and bungalows and 25% for flats built into Fitch's market value decline (MVD) assumptions for UK RMBS transactions.

The rating triggers for the issuer account banks, qualified investments, derivative counterparties and some of the mortgages trustee account banks in the transaction documents have specific reference to Fitch criteria, which creates a degree of uncertainty regarding future counterparty arrangements.

To analyse the credit enhancement levels, Fitch evaluated the collateral using its default model ResiEMEA. The agency assessed the transaction cash flows using default and loss severity assumptions under various structural stresses including prepayment speeds and interest rate scenarios. The cash flow tests showed that each class of notes could withstand loan losses at a level corresponding to the related stress scenario without incurring any principal loss or interest shortfall and can retire principal by the legal final maturity.

During the previous 12 months, Fitch conducted a site visit to VM's offices and conducted a file review to check the quality of VM's originations. During the site visit, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and with other information provided to the agency about the asset portfolio.

Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Overall and together with the assumptions referred to above, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.