OREANDA-NEWS. Fitch Ratings has assigned Precise Mortgage Funding 2015-2B plc's notes expected ratings, as follows:

Class A: 'AAA(EXP)sf', Outlook Stable
Class B: 'AA(EXP)sf', Outlook Stable
Class C: 'A(EXP)sf', Outlook Stable
Class D: 'BBB(EXP)sf', Outlook Stable
Class E: 'BB(EXP)sf', Outlook Stable
Class Z: not rated

The transaction is a securitisation of buy-to-let (BTL) mortgages that were originated by Charter Court Financial Services (CCFS), trading as Precise Mortgages (Precise or the originator) in the UK (excluding Northern Ireland). The loans are serviced by the servicing arm of Charter Court Financial Services Limited, operating under the name Exact. The majority of the mortgages (Tier 1 & Tier 2 products) have been originated in line with market-typical prime BTL underwriting guidelines. This is the fifth transaction from Precise and Fitch has assigned ratings to the previous four transactions.

KEY RATING DRIVERS
Prime Underwriting, Limited History
Fitch deemed the Tier 1 & 2 BTL loans to be consistent with other prime BTL in the UK market. These loans have been granted to borrowers with no adverse credit; full and detailed rental income verification; full property valuations with robust audit checks; and with a clear lending policy in place. Data, although limited, shows robust performance which would be expected of prime loans. Fitch treated these loans as prime but with an increased underwriting adjustment to account for the limited data history.

Flexible Underwriting
The portfolio also includes 14% of Tier 3 products, for which the underwriting criteria permits prior adverse credit behaviour and pricing is higher. Since the Tier 3 originations represent the smallest sample of originated loans among the different product categories, the performance data available is very limited. However, none of the Tier 3 loans selected for this pool have any adverse credit history. Fitch used the non-conforming matrix for these loans but with a reduced underwriting adjustment.

Unrated Originator and Seller
The originator and seller are not rated entities and as such may have limited resources available to repurchase any mortgages in the event of a breach of the representations and warranties (RW) given to the issuer. While this is a weakness, there are a number of mitigating factors that make the likelihood of a RW breach remote.

High London Concentration
49% of the loans are located in Greater London. Although this is typical for BTL pools, it is much higher than the proportion of the UK population in this region. Fitch views properties in London as overvalued and applies a sustainable discount of 31.1% in its stressed scenarios. In addition, Fitch has increased the default probability for these loans to account for the geographical concentration.

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 negative rating actions on the notes. Fitch's analysis revealed that a 30% increase in the weighted average (WA) foreclosure frequency, along with a 30% decrease in the WA recovery rate, would imply a downgrade of the class A notes to 'A+sf' from 'AAAsf' and the class B notes to 'Asf' from 'AAsf'.

More detailed model implied ratings sensitivity can be found in the presale report which will be available at www.fitchratings.com.

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

DATA ADEQUACY
Precise provided Fitch with a loan-by-loan data template. All relevant fields were provided in the data tape, with the exception of prior mortgage arrears, where Precise was unable to differentiate between loans having had one to six months of prior arrears and those having had seven to 12 months prior arrears. Performance data on historical static arrears was provided for all loans originated by Precise, but the scope of the data was limited by the relatively small origination volumes to date and the length of available history (the first Precise origination was in 2010).

Precise has experienced only two sold repossessions to date, due to its limited origination history. As a proxy, Precise provided a data tape in Fitch template format for 242 sold repossessions that have been serviced by Exact, which included the Precise-originated loans. Although the majority of the sample was not for loans originated by Precise, the agency considers the performance of the servicer to be one of the key components in determining sold possession performance. The majority of the loans in the repossession file were from non-prime originations that were originated at the peak of the market during 2006-2008, when in many cases property valuations were optimistic. Despite this, the observed quick sale adjustments (QSA) were fairly well aligned to Fitch's base criteria assumptions.

Given this and that in Fitch's opinion Precise's approach to obtaining property valuations is robust - as it obtains both full valuations and conducts subsequent desktop audit valuations - the agency has applied QSA assumptions as per its standard criteria and not applied any upward adjustments.

Fitch requested to receive a third party assessment conducted on the asset portfolio information and expects to receive and review the results before the transaction's close.

Fitch conducted a review of a small targeted sample of Precise'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 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.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by Precise as at 12 June 2015
- Transaction reporting provided by U.S. Bank Global Corporate Trust Services for Precise 2014-2 plc as at 12 March 2015
- Loan enforcement details provided by Precise as at 01 May 2015
- Loan performance data provided by Precise as at 01 May 2015