OREANDA-NEWS. Fitch Ratings says that there is no rating impact on Equity Release Mortgage No.5 (ERF5) following an amendment of the transaction documentation.

ERF5 is a securitisation of a portfolio of UK reverse mortgages originated by Aviva Plc. Borrowers with equity release mortgages do not make payments on a regular basis. Instead, interest is accrued over the mortgage term and paid as a lump sum with the original loan balance and any further advance when the borrower exits the pool. A borrower exit could be triggered by death, voluntary repayments, a move to long-term care or a move to a lower value property.

Under the amended transaction documentation, the minimum required rating for the credit facility provider will be 'A'/'F1' instead of the previous 'F1+' rating trigger. This is in line with Fitch's counterparty criteria for structured finance transactions, which states that counterparties rated at least 'A'/'F1' can support note ratings of 'AAAsf'.

The credit facility currently stands at GBP168.4m and is used to cover interest shortfalls on the class A, B and C notes and senior expenses.

The current credit facility provider, the Royal Bank of Scotland (RBS; BBB+/Stable/F2) does not meet the updated trigger. Fitch notes that upon the downgrade of RBS to 'A'/Stable/'F1' in 2011, the bank posted the outstanding amount of the credit facility as cash collateral in an bank account held with BNP Paribas Securities Services (A+/Stable/F1).