OREANDA-NEWS. Fitch Ratings has upgraded eight tranches of three Great Hall Mortgages (GHM) transactions and affirmed 20 others. A full list of rating actions follows at the end of this commentary.

KEY RATING DRIVERS

Stable Asset Performance
The portion of loans in arrears in all three transactions is among the lowest across Fitch-rated UK non-conforming deals. Three months plus arrears have come down from their peaks of 13.1%, 11.6% and 12.7% of the current loan balance for GHM 2006-1, GHM 2007-1 and GHM 2007-2, respectively, in June 2009 (GHM 2006-1 and GHM 2007-1) and March 2010 (GHM 2007-2), and currently stand at 2.8%, 3% and 4.1%. The improvement is reflected in today's upgrades.

Loss severities on properties sold in GHM 2006-1 are at 25.2%, much lower than 29.5% and 30% for the less seasoned GHM 2007-1 and GHM 2007-2 transactions. This is explained by the transaction's lower loan-to-value (LTV) levels than in the 2007 vintage deals from the series.

Steady Structure
Following breaches in cumulative possessions and cumulative loss triggers, the reserve funds (RF) cannot amortise further and a switch to pro rata amortisation of the notes is not permitted. As a result, Fitch expects a steady increase in credit enhancement for all tranches.

Commingling Risk
National Westminster Bank (Natwest) acts as collection account bank in all three deals. Following Natwest's downgrade to 'BBB+'/'F2' in May 2015, the bank does not comply with the minimum Short-term rating of 'F1' stipulated in the transactions' documentation.

A daily sweep from the collection to the issuer account (held with BNY Mellon, rated AA-/Stable/F1+), in line with the agency's structured finance counterparty criteria, together with Natwest's current rating, is still sufficient to support a 'AAAsf' rating. However, the respective issuers have indicated that they will not be implementing remedial actions to comply with their transaction documentation. Therefore, in its analysis of the transactions, Fitch tested for commingling risk and found that current credit enhancement is sufficient to withstand such stresses.

Interest Only Loan Concentration
The transactions all have a large portion of interest-only (IO) loans (85.1% for GHM 2006-1, 85.3% for GHM 2007-1 and 82.7% for GHM 2007-2) and a concentration of more than 20% of IO loans maturing within a three-year period. As per criteria, Fitch carried out a sensitivity analysis assuming a 50% increase in default probability for these loans and found that current credit enhancement is able to accommodate such stresses.

RATING SENSITIVITIES

All the transactions are fully backed by floating-rate loans. Increases in interest rates leading to larger defaults and associated losses than Fitch's expectations could result in downgrades of the notes.

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.

Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

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

The information below was used in the analysis:
-Loan-by-loan data provided by Western Mortgage Services as of end-June 2015.
-Transaction reporting provided by Western Mortgage Services as of end-June 2015.
-Counterparty information provided by Western Mortgage Services as of end-June 2015.

Fitch has taken the following ratings:

Great Hall Mortgages No. 1 plc (Series 2006-1)
Class A2a (XS0276086393) affirmed at 'AAAsf'; Outlook Stable
Class A2b (XS0276092797) affirmed at 'AAAsf'; Outlook Stable
Class Ba (XS0276086989) affirmed at 'AAAsf'; Outlook Stable
Class Bb (XS0276093332) affirmed at 'AAAsf'; Outlook Stable
Class Ca (XS0276087524) upgraded to 'AA-sf' from 'Asf'; Outlook Stable
Class Cb (XS0276093928) upgraded to 'AA-sf' from 'Asf'; Outlook Stable
Class Da (XS0276088506) affirmed at 'BBBsf'; Outlook Stable
Class Db (XS0276095030) affirmed at 'BBBsf'; Outlook Stable
Class Ea (XS0276089223) affirmed at 'BBsf'; Outlook Stable

Great Hall Mortgages No. 1 plc (Series 2007-1)
Class A2a (XS0288626525) affirmed at 'AAAsf'; Outlook Stable
Class A2b (XS0288627507) affirmed at 'AAAsf'; Outlook Stable
Class Ba (XS0288628224) affirmed at 'AAsf'; Outlook Stable
Class Bb (XS0288628810) affirmed at 'AAsf'; Outlook Stable
Class Ca (XS0288629545) affirmed at 'A-sf'; Outlook Stable
Class Cb (XS0288630121) affirmed at 'A-sf'; Outlook Stable
Class Da (XS0288630394) affirmed at 'BBsf'; Outlook Stable
Class Db (XS0288630550) affirmed at 'BBsf'; Outlook Stable
Class Ea (XS0288630808) affirmed at 'Bsf'; Outlook Stable

Great Hall Mortgages No. 1 plc (Series 2007-2)
Class Aa (XS0308354504) affirmed at 'AAAsf'; Outlook Stable
Class Ab (XS0308354843) affirmed at 'AAAsf'; Outlook Stable.
Class Ac (XS0308462141) affirmed at 'AAAsf'; Outlook Stable
Class Ba (XS0308356970) affirmed at 'Asf'; Outlook Stable
Class Ca (XS0308357358) upgraded to 'BBBsf' from 'BB+sf', Outlook Stable
Class Cb (XS0308355733) upgraded to 'BBBsf' from 'BB+sf', Outlook Stable
Class Da (XS0308357788) upgraded to 'BBsf' from 'Bsf', Outlook Stable
Class Db (XS0308356111) upgraded to 'BBsf' from 'Bsf', Outlook Stable
Class Ea (XS0308357861) upgraded to 'Bsf' from 'CCCsf', Outlook Stable
Class Eb (XS0308356467) upgraded to 'Bsf' from 'CCCsf', Outlook Stable