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Rooftop threatened by securitisation downgrade

Rooftop Mortgages is facing another potential downgrade of its securitisation following Fitch Ratings putting out a negative ratings watch.

This is the ratings agencys way of notifying the industry of its intent to take action, in this negative, which could result in a potential downgrade.

Following Fitch issuing this sort of warning it typically takes action within three to six months. This action will either be an affirmation that the problem has gone away or a downgrade.

Three tranches of the lenders securitisation, Farringdon Mortgages No. 2, have been put on watch following increased losses in the quarter that have culminated in a reserve fund draw. At the same time, Fitch has affirmed all tranches of Farringdon Mortgages No. 1 Plc, which was downgraded earlier this year.

Both transactions are originated by Rooftop Mortgages, a subsidiary of Bear Stearns, and have been the subject of a renewed loan-by-loan and cash flow analysis.

A spokesman for Fitch says: Nobody has lost any money at this point but the reserve fund is diminished so there is less protection. If Farringdon Mortgages No. 2 starts performing again then the reserve fund will be replenished. This is a red flag of a potential problem.

Rooftop was unable to comment.

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