OREANDA-NEWS. Fitch Ratings has assigned Lanark 2015-1 plc's notes final ratings, as follows:

Class 1A: 'AAAsf', Outlook Stable
Class 2A: 'AAAsf', Outlook Stable

The notes are the seventh public issuance from the Lanark master trust programme. The master trust property consists of prime residential owner-occupied mortgage loans originated in the UK by Clydesdale Bank PLC and Yorkshire Bank Home Loans Limited, together the originators, which are subsidiaries of National Australia Bank Limited.

The trust property contains approximately GBP4.7bn at closing. The ratings are based on Fitch's assessment of the underlying collateral, available credit enhancement, the origination and underwriting procedures used by the originators, the servicing capabilities of Clydesdale and the transaction's financial and legal structure.

KEY RATING DRIVERS
Portfolio Characteristics
Expected losses on the transaction have decreased by 0.4% compared with Lanark 2014-2 following the application of Fitch's 2015 UK mortgage loss criteria, mainly due to an update to the income and house price data. The portfolio has a weighted average (WA) seasoning of 43 months, a WA original loan-to-value ratio (OLTV) of 72.5% and WA debt to income ratio (DTI) of 40.1%. The WA OLTV and WA DTI are in line with the average for UK prime transactions rated by Fitch.

Geographical Concentration
Forty three per cent of the pool is concentrated in Scotland, York and Humber, which is higher than the proportion of population in these regions. As the portfolio is more likely to be exposed to regional economic declines or natural disasters such as flooding, Fitch increased the default probability by 15% for those loans in these regions that exceed two times the proportion of the population of these regions.

Loans Added to Portfolio
Approximately GBP500m of loans will be sold into the programme at closing; GBP1.5bn were added at the time of Lanark 2014-2. Fitch has factored the impact of the new loans into its analysis when calculating the default probabilities and recovery rates.

Illiquid Property Adjustment
Around 34% of the portfolio falls in the high value bracket (ie the top five percentile of the property region), which is higher than other recent UK RMBS transactions rated by Fitch. As part of its criteria, Fitch applied stresses to these loans to account for the lower liquidity and demand for such properties in an economic downturn.

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 1A and class 2A notes to 'AA-sf' from 'AAAsf'.

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
Clydesdale provided Fitch with a loan-by-loan data template with all of the key data fields completed, other than prior mortgage arrears. The agency typically calculates the sLTV using the current balance at the time of the portfolio cut-off date, and the valuation corresponding to that date.

The collateral review of the mortgage portfolio also involves reviewing loan-by-loan loss severity information on the originator's sold repossessions, during which, the agency determines the originator's experienced loss severity rate and quick sale adjustment (QSA) discount. Fitch received updated loan by loan repossession data, and the QSA calculated was approximately 27%, which is higher than Fitch's criteria assumption but in-line with the QSA calculated for the 2014-2 issuance. Fitch used the observed QSA when determining the recovery rate for the assets in the pool.

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.

Fitch conducted a review of a small targeted sample of Clydesdale's origination files within the last 12 months 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.

At closing, Fitch also affirmed the ratings of the outstanding notes from the prior issuance under Lanark Master Issuer plc, as detailed below:

Lanark Master Issuer plc - Issue 2012-2:
Class 1A: affirmed at 'AAAsf'; Outlook Stable
Class 2A: affirmed at 'AAAsf'; Outlook Stable

Lanark Master Issuer plc - Issue 2013-1:
Class 1A1: affirmed at 'AAAsf'; Outlook Stable
Class 1A2: affirmed at 'AAAsf'; Outlook Stable

Lanark Master Issuer plc - Issue 2014-1:
Class A1: affirmed at 'AAAsf'; Outlook Stable
Class A2: affirmed at 'AAAsf'; Outlook Stable

Lanark Master Issuer plc - Issue 2014-2:
Class 1A: affirmed at 'AAAsf'; Outlook Stable
Class 2A: affirmed at 'AAAsf'; Outlook Stable

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by Clydesdale as at 30 April 2015
- Transaction reporting provided by Clydesdale as at 22 May 2015
- Loan enforcement details provided by Clydesdale as at 30 April 2015
- Loan performance data provided by Clydesdale as at 30 April 2015.