Fitch takes action on Money Partners securitisations

7 December 2009 | By Natalie Thomas

The agency has also revised the outlooks on two tranches of MPS3 to Stable from Negative, reflecting the sufficient build-up in credit enhancement required for the ‘AA-’ rating assigned to the deal’s class M1a and M1b notes.

The Goldman Sachs owned Money Partners suspended new lending in February 2009.

The portfolios comprise UK non-conforming loans with significant portions of second lien mortgages ranging from 10.9% (MPS3) to 16.1% (MPS4).

The rating affirmations of the senior and mezzanine tranches of the first three transactions reflect that the October 2009 collateral reports showed a continued decline in the volume of loans in arrears and outstanding repossessions, which Fitch sees as positive for the future performance of the transactions.

The prompt sale of properties has prevented a build-up in the cost of carry of repossessed loans and limited potential losses from house price volatility over the last year. Fitch’s main concern lies with the second lien mortgages which are showing high loss severities, ranging from 77.2% (MPS3) to 116.7% (MPS4) in October 2009.

Fitch also says the loss severities realised from second lien mortgages were expected by Fitch given the overall decline in UK house prices since the summer of 2007. In volume terms, the losses generated by second lien loans made up between 34.8% (MPS1) and 67.4% (MPS4) of the overall losses generated in the last quarter. Cumulative losses range from 3.1% (MPS3) to 3.3% (MPS2) of the initial collateral balance of these deals.

Meanwhile, the collateral report for October 2009 showed the first signs of arrears stabilising in MPS4, The volume of repossessed properties, according to the Q309 collateral reports for MPS4, are comparable to those seen in previous quarters, but the volume of sold properties continues to increase, which is why the transaction is still generating significant losses.

The recent slight decline in arrears for MPS1, MPS2 and MPS3 and the stabilisation of arrears in MPS4 is also reflected in the collection rates reported by the servicer. The payment reports show that an increasing number of borrowers, who are more than six months in arrears, are making some form of payment, as reflected in the available revenue funds reported in September 2009 (for MPS1, MPS3 and MPS4) and November 2009 (MPS2).

As repossessions have declined and borrower affordability has improved, the utilisation of reserve funds has slowed down in MPS3 and MPS4. The reserve funds of these deals are currently at 50.6% (MPS3) and 60.8% (MPS4) of their target amounts.

At the same time, the issuer of the more seasoned transaction, MPS1, reported a reserve fund top-up of GBP204,897, thereby improving the credit support available to the notes. The reserve fund in September 2009 stood at 78% of its target amount.

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