Fitch Affirms Hawthorn Finance Limited Series 2008-A
OREANDA-NEWS. Fitch Ratings has affirmed Hawthorn Finance Limited Series 2008-A (ISIN XS0376679949) at 'AAAsf' with a Stable Outlook.
The transaction comprises buy-to-let mortgages originated by West Bromwich Mortgage Company Limited, a wholly owned subsidiary of West Bromwich Building Society.
KEY RATING DRIVERS
Arrears Broadly Stable
Over the past year, the transaction's volume of loans in arrears has remained relatively stable. As of end-November 2015, loans in arrears by more than three months (excluding loans in possession) stood at 0.39% of the outstanding portfolio balance, which is well below Fitch's UK buy-to-let three-months plus index (1.14%).
Limited Volumes of Properties in Possession
The outstanding balance of loans with properties taken into possession has remained relatively limited at 0.1% of the current pool balance. The cumulative realised losses on properties sold after possession remain limited at 0.13% of the original pool balance.
Fitch has analysed the concentration of interest-only (IO) loan maturities to assess the effect of a period of limited lending availability coinciding with a significant proportion of expected bullet repayments. The IO loans maturing between 2030 and 2032 account for more than 20% of the portfolio balance. To account for this risk we conducted a sensitivity analysis by increasing the foreclosure frequency on the concentrated portion of loans to 50%. The analysis showed that the higher stresses did not have a rating impact. Nevertheless, Fitch will keep monitoring this risk as the transaction continues to amortise.
Increases in repossessions and associated losses beyond Fitch's expectations, particularly as the portfolio continues to deleverage, could lead to strains on excess spread and subsequent reserve fund draws. This could have a negative impact on the credit support available resulting in potential negative rating actions.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. 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 pool ahead of the transaction's initial closing. The subsequent performance of the transaction 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.