OREANDA-NEWS. Fitch Ratings has maintained Nostrum Mortgages No.2's (ISIN PTTGUIOM007) Class A notes on Rating Watch Evolving (RWE) .

The portfolio comprises Portuguese mortgage loans originated and serviced by Caixa Geral de Depositos (CGD, BB+/Negative/B).

KEY RATING DRIVERS
Payment Interruption Risk
The maintained RWE reflects Fitch's understanding that the issuer may implement remedial actions to address the payment interruption risk.

Fitch placed Nostrum Mortgages No.2's Class A notes on RWE on 3 November 2014, as a result of exposure to payment interruption risk. In its analysis, Fitch had assessed the liquidity available in the transaction to fully cover senior fees, net swap payments and note interest in the event of servicer default. We have found that the available liquidity is insufficient to provide payments to the notes for two interest payment periods should CGD default.

Stable Performance of Underlying Assets
In the last 12 months, the loans in arrears by three months or more (excluding defaults) remained stable at 0.85% of the current portfolio balance and below Fitch's Portuguese index for three months plus arrears at 1%. Period defaults have decreased to 0.56% of the original portfolio balance, resulting in a partial replenishment of the reserve fund. It currently stands at 93% of its target level.

Fitch will monitor the progress of potential remedial actions and the performance of the transaction and will take rating actions accordingly in the next three months.

RATING SENSITIVITIES
Deterioration in asset performance may result from economic factors. A corresponding increase in new defaults and associated pressure on excess spread and reserve funds, beyond Fitch's assumptions, could result in negative rating actions.

The ratings are also sensitive to changes in Portugal's Country Ceiling (A+) and consequently changes to the highest achievable rating of Portuguese structured finance notes.