OREANDA-NEWS. Fitch Ratings affirms the ratings on the senior and subordinate notes issued by EFS Volunteer No 3 LLC Series 2012-1. The Rating Outlook remains Stable on all the notes.

--Class A-2 affirmed at 'AAAsf'; Outlook Stable;
--Class A-3 affirmed at 'AAAsf'; Outlook Stable;
--Class B affirmed at 'AAsf'; Outlook Stable.


High Collateral Quality: The trust collateral comprises Federal Family Education Loan Program (FFELP) loans with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch's current U.S. sovereign rating is 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance), excess spread, and for the senior notes, subordination provided by the subordinate notes. As of February 2016, senior and total parity levels are 108.83% and 102.13%, respectively. The trust is in turbo, and no excess cash can be released until the notes are paid in full.

Adequate Liquidity Support: Liquidity support is provided by a debt service reserve fund sized at the greater of 0.25% of the pool balance and 0.15% of the initial pool balance. The debt service reserve fund is sized at $971,302 as of February 2016.

Acceptable Servicing Capabilities: Pennsylvania Higher Education Assistance Agency (PHEAA) services the entire trust. Fitch has reviewed the servicing operations of PHEAA and believes them to be an acceptable servicer of FFELP student loans.

On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014.


Since the FFELP student loan ABS relies on the U.S. government to reimburse defaults, 'AAAsf' FFELP ABS ratings will likely move in tandem with the 'AAA' U.S. sovereign rating. Aside from the U.S. sovereign rating, defaults, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a build-up of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.