OREANDA-NEWS. Fitch Ratings has upgraded the senior notes of AyT Goya Hipotecario III and AyT Goya Hipotecario V, both Spanish RMBS deals.

Both transactions comprise loans originated by Barclays Bank SAU and serviced by CaixaBank, S. A. (BBB/Positive/F2). A full list of rating actions is available at the end of this commentary.

KEY RATING DRIVERS

Updated Counterparty Criteria

The upgrade reflects Fitch's new Counterparty Criteria for Structure Finance and Covered Bonds (published on 18 July 2016) under which notes backed by a' BBB' or 'F2' rated entity can be rated up to 'A+'. The direct support counterparty trigger definitions in the transaction documents are 'BBB'/'F2', revised from 'A'/'F1' after CaixaBank in January 2015 acquired Barclays Bank SAU. The upgrades also reflect increased credit enhancement (CE) for both the senior notes.

Stable Asset Performance

The transactions have shown sound asset performance and are comparable with the Spanish average. As of the latest reporting periods, three-months plus arrears (excluding defaults) as a percentage of the current pool balance remain below 0.8% for both transactions. These numbers are in line with Fitch's prime index of three-months plus arrears (excluding defaults) of 0.84%.

Cumulative defaults, defined as mortgages in arrears by more than 18 months in both deals, stand at 1.1% and 0.8%, respectively, of the initial portfolio balance, below the sector average of 5.5%. However, Fitch believes that these levels may rise as late-stage arrears roll into the default category.

Reserve Fund Draws

The reserve fund for AyT Goya Hipotecario V has been replenished to its target while that for AyT Goya Hipotecario III remains below its target, currently at 99%. Fitch believes further draws may take place on future payment dates, but expect them to be small in size, with limited effect on the junior tranches' CE.

As the reserve fund is the only source of CE for the class B notes of AyT Goya Hipotecario III, the rating of the junior notes remains linked to the rating of CaixaBank as reflected in today's affirmation.

RATING SENSITIVITIES

A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift in interest rates could jeopardise the ability of the underlying borrowers to meet their payment obligations.

Fitch may also take negative rating action if draws on the reserve funds in the next payment dates exceed its assumptions, as this may compromise the protection of the junior notes.

The rating of the class B notes is also sensitive to the rating of Caixabank.

DUE DILIGENCE USAGE

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

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

For AyT Goya Hipotecario III prior to the transaction closing, Fitch did not review the results of a third party assessment conducted on the asset portfolio information.

For AyT Goya Hipotecario V prior to transaction closing 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, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

Sources of Information:

-Investor and servicer reports provided by Haya Titulizacion S. G.F. T, S. A since close and until:

-December 2015 for AyT Goya Hipotecario III

-March 2016 for AyT Goya Hipotecario V

- Loan-by-loan data provided by:

Haya Titulizacion S. G.F. T, S. A. and sourced from the European Data Warehouse with a cut-off date of March 2016