OREANDA-NEWS. Fitch Ratings is maintaining Finance for Residential Social Housing's (Fresh) Series 1 and 2 notes on Rating Watch Negative (RWN), as follows:

Series 1 Class A1 notes: 'AA+sf'; RWN maintained
Series 1 Class A2 notes: 'AA+sf'; RWN maintained
Series 1 Class A3 notes: 'AAsf'; RWN maintained
Series 1 Class B notes: 'BBBsf'; RWN maintained
Series 2 Class A notes: 'AAsf'; RWN maintained
Series 2 Class B notes: 'BBBsf'; RWN maintained

Fresh is a securitisation of housing loans originated by The Housing Corporation (THC) and Housing for Wales, Tai Cymru, to housing associations in England and Wales. The series 1 notes are backed by fixed-rate loans while the series 2 notes are backed by variable-rate loans.

KEY RATING DRIVERS
The reporting issues that contributed to the placement of the notes on RWN on 24 September 2014 have been partially clarified. The explanation provided does not affect the analysis of Series 1, but for Series 2 the rating impact of clarifications provided on deferred interest is yet to be assessed. For both series, the RWN is maintained pending the provision of additional obligor information needed for the analysis.

Royal Bank of Scotland (RBS), as the cash administrator of the transaction, shows the actual balance of each asset portfolio under the title "asset characteristics" of the investor report. These balances match the loan-by-loan information provided to Fitch and are the basis of the agency's analysis. The correction made by RBS to the October 2013 and April 2014 report was related to asset balance estimates shown under the "principal movements" title of the report, and as such does not affect our analysis. However, small discrepancies between the "principal movements" and the "asset characteristics" balances remain and so far the cash administrator has not explained those.

In addition, Fitch is now seeking clarification on issues pertaining to the series 2 deferred interest. Fitch understands from RBS that the reported balance of the series 2 notes may not include the deferred interest amount of GBP1,765,866, which conflicts with what is stated in the investor report. The investor report is also unclear on whether this amount of deferred interest relates to the class A or the class B notes or both. This could significantly affect the ratings of the notes as in the priority of payments the deferred amounts are to be repaid only after the full principal redemption of the class B notes.

The issuer has not yet taken any decision on providing credit information on the underlying borrowers which Fitch deems crucial in resolving the RWN.

RATING SENSITIVITIES
Should no further borrower information be available, Fitch may not be able to maintain ratings on either series 1 or series 2 due to insufficient information.

Provided that the requested borrower credit information is made available we expect that the downgrades of the series 1 notes will not exceed one rating category. The risk and possible magnitude of the downgrade is greater for series 2, due to the higher borrower concentration in this series and possibly, the reconsideration of deferred interest in our analysis.

We expect the RWN to be resolved within three months although this will depend on if or when the additional information can be provided.