Various Rating Actions Taken In U.K. Nonconforming RMBS Transaction Eurosail-UK 2007-3BL Following Review

Stocks and Financial Services Press Releases Thursday August 3, 2017 17:28
LONDON--3 Aug--S&P Global Ratings

LONDON (S&P Global Ratings) Aug. 3, 2017--S&P Global Ratings today raised its credit ratings on Eurosail-UK 2007-3BL PLC's class A3a, and A3c notes. At the same time, we have affirmed our ratings on the class B1a, B1c, C1a, C1c, D1a, and E1c notes (see list below).

We have conducted our credit and cash flow analysis using loan-level information and investor reports as of May 2017. Our analysis includes the application of our European residential loans criteria (see "Criteria - Structured Finance - General: Methodology And Assumptions: Assessing Pools Of European Residential Loans," published on Dec. 23, 2016).

The servicer (Acenden Ltd.) reports arrears that include amounts outstanding, delinquencies, and other amounts owed. Other amounts owed include arrears of fees, charges, costs, ground rent, and insurance, among other items. Delinquencies include principal and interest arrears on the mortgage loans, based on the borrowers' monthly installments. Amounts outstanding are principal and interest arrears, after the servicer first allocates borrower payments to other amounts owed.

For the transaction, the servicer first allocates any arrears payments to other amounts owed, then to interest and principal amounts. For borrowers, the servicer first allocates any arrears payments to interest and principal amounts, and then to other amounts owed. This difference in the servicer's allocation of payments for the transaction and the borrower results in amounts outstanding being greater than delinquencies. We have applied an additional stress to the weighted-average loss severity (WALS) to mitigate this risk.

In terms of 90+ day delinquencies, the transaction underperforms our U.K. nonconforming residential mortgage-backed securities (RMBS) index (see "U.K. RMBS Index Report Q1 2017," published on June 1, 2017). Delinquencies in Eurosail-UK 2007-3BL decreased to 14.81% from 16.75% over this period.

Our weighted-average foreclosure frequency (WAFF) assumptions, take into consideration our projection of additional delinquencies, while our WALS assumptions reflect the increase in house prices since our previous review (see "Various Rating Actions Taken In U.K. Nonconforming RMBS Transaction Eurosail-UK 2007-3BL Following Restructure," published on May 31, 2016).

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