OREANDA-NEWS. Fitch Ratings has affirmed 85 tranches of the RMAC RMBS series. A full list of rating actions is available at the end of this rating action commentary.

The RMAC transactions are securitisations of UK non-conforming loans, originated by GMAC-RFC Limited.

KEY RATING DRIVERS
Strong Credit Enhancement (CE)
The high seasoning of the transactions has led to the portfolios deleveraging to between 3.1% (RMAC 2003-2) and 48.6% (RMAC 2007-1) of their initial pool balances.

The structures of the earlier deals (RMAC 2003-2, 2003-3, 2003-4, 2004-1 and 2004-2) in the series do not include reserve funds but are instead over-collateralised. The reserve funds for all other transactions have either amortised to floor level or are no longer allowed to amortise as a result of a breach of the cumulative loss trigger (set at 1.25% of the initial portfolio balance for all transactions). As a result, CE across the series has continued to build up steadily.

In December 2015 60 tranches were placed on Rating Watch Positive following the publication of the Criteria Addendum: UK - Residential Mortgage Assumptions on 16 December 2015. Given the current levels of CE Fitch has affirmed those ratings and assigned Stable Outlooks.

Solid Performance
The affirmations across all transactions reflect the strong performance of the underlying portfolios. The volume of loans in arrears by more than three months remains on a decreasing trend and as of end-December 2015, ranging between 4.2% (RMAC 2004-NS1) and 9.2% (RMAC 2007-NS1) of their respective portfolio balances compared with between 5.7% (RMAC 2004-NSP2) and 12.5% (RMAC 2007-NS1) as of end-December 2014. For the 2006 and 2007 deals, the arrear levels remain comparable with the UK non-conforming average of 9.2% while those for the 2003-2005 deals remain far below this level.

Unhedged Interest Rate Risk
The portfolios of RMAC 2003-2, 2003-3, 2003-4 and 2004-1 comprise solely LIBOR-linked loans. All other RMAC portfolios contain varying proportions of BBR-linked loans, between 26% (RMAC 2004-NS3) and 82% (RMAC 2006-NS1). These transactions are not hedged against the basis risk between the LIBOR-linked notes and BBR-indexed mortgages. In its analysis, Fitch stressed the excess spread to account for this risk and found the CE available to the rated notes sufficient to withstand the stresses.

Interest-only Concentration
The transactions have material concentration of interest-only loans maturing within a three-year period during the lifetime of the transaction. As per its criteria, Fitch carried out a sensitivity analysis assuming a 50% default probability for these loans. No rating action was deemed necessary as a result of the interest-only loan concentration. Nevertheless, Fitch will keep monitoring this risk as the transactions continue to amortise.

Currency Swap Obligations
The affirmation of the currency swap ratings are based on Fitch's view that the swap payment obligations rank pro rata and equally with the referenced notes. Consequently, the credit profiles of the currency swap payment obligations are consistent with the long-term rating on the referenced notes.

Loans Previously in Arrears
Under Fitch's Criteria Addendum: UK - Residential Mortgage Assumptions dated 16 December 2015 loans that are currently performing but have been in arrears in the past 24 months have an additional 30% hit in their weighted average foreclosure frequency. As Fitch was not provided with the date the loans were last in arrears the agency made conservative assumptions in its analysis and found no impact on the ratings due to strong CE.

RATING SENSITIVITIES
The transactions are backed by floating-interest-rate loans. In the current low interest rate environment, borrowers are benefiting from low borrowing costs. An increase in interest rates could lead to performance deterioration of the underlying assets and consequently downgrades of the notes if defaults and associated losses exceed those of Fitch's stresses.

Changes to the ratings of the swap-referenced notes will likely lead to an equal change in the rating of the SPV's currency swap obligations. The rating sensitivity will primarily be driven by the rating analysis applicable to the corresponding note. The rating of the SPV's currency swap obligations will be withdrawn if the currency swap agreement is terminated due to non-performance by the swap counterparty or a non-credit related event.

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 Paratus AMC for all deals with a cut-off date of 30 November 2015
-Transaction reporting provided by Paratus AMC for all deals since close and until December 2015

MODELS
The models below were used in the analysis. Click on the link for a description of the model.