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Rating Action:

Moody's places on review for downgrade 13 UK NC RMBS transactions and comments on 14 other UK NC RMBS transactions

26 Jun 2009

Approximately GBP 5.2 billion of debt securities affected.

London, 26 June 2009 -- Moody's Investors Service has today placed under review for possible downgrade notes issued by the following 13 UK non-conforming RMBS transactions (the "Affected Transactions"):

- Alba 2005-1 Plc, Class C, Class D and Class E;

- Great Hall Mortgages No.1 Plc Series 2007-01;

- Great Hall Mortgages No.1 Plc Series 2007-02;

- Leek Finance Number Nineteen Plc;

- Money Partners Securities 3 Plc (MPS 3);

- Money Partners Securities 4 Plc (MPS 4);

- Newgate Funding Plc: Series 2006-1;

- Newgate Funding Plc: Series 2006-2;

- Newgate Funding Plc: Series 2006-3;

- Newgate Funding Plc: Series 2007-1;

- Newgate Funding Plc: Series 2007-2;

- RMAC SECURITIES No. 1 Plc Series 2007-NS1; and

- Uropa Securities Plc Series 2007-01B.

All classes of notes issued by the above transactions (except for the MERC certificates) are being placed on review, unless otherwise specified. A complete list of all the 133 affected tranches placed under review today can be found in the attached spreadsheet (see the link at the end of this press release).

Today's rating actions were prompted by further deterioration of the collateral performance at levels higher than those currently expected by Moody's.

Due to worse-than-expected performance, Moody's will also review the ratings of the notes issued by the following 14 transactions (the "Additional Transactions"):

- Eurosail 2006-1;

- Eurosail 2006-2BL Plc;

- Eurosail 2006-3NC Plc;

- Eurosail UK 2007-1NC Plc;

- Marble Arch Residential Securitisation No. 4 Plc;

- Preferred Residential Securities 05-1 Plc;

- Preferred Residential Securities 05-2 Plc;

- Preferred Residential Securities 06-1 Plc;

- Southern Pacific Financing 05-B Plc;

- Southern Pacific Securities 05-1 Plc;

- Southern Pacific Securities 05-2 Plc;

- Southern Pacific Securities 05-3 Plc;

- Southern Pacific Financing 06-A Plc; and

- Southern Pacific Securities 06-1 Plc.

The ratings of the notes relating to the Additional Transactions are already on review because of the exposure to hedging agreements provided by Lehman Brothers Special Financing Inc. and guaranteed by Lehman Brothers Holdings Inc ("LBHI") and/or because of the exposure to entities ultimately owned by LBHI performing the servicing and cash management functions.

The review of the Additional Transactions will cover their entire capital structures. However, due to their higher levels of seasoning, in the case of Preferred Residential Securities 05-1 Plc, Preferred Residential Securities 05-2 Plc, Southern Pacific Financing 05-B Plc, Southern Pacific Securities 05-1 Plc, Southern Pacific Securities 05-2 Plc and Southern Pacific Securities 05-3 Plc, the rating impact of the worse-than-expected performance is likely to be limited to the junior and mezzanine tranches, according to the performance data as of today.

In identifying for review the 27 UK non-conforming RMBS transactions listed above, Moody's has taken into account the performance of the collateral to date, its deviation from Moody's expectations as well as the levels of credit enhancement available to absorb the losses on the respective portfolios. Within the UK non-conforming RMBS sector, these transactions have shown a material deviation from Moody's performance expectations. As an example, since closing, Southern Pacific Securities 05-3 Plc has experienced cumulative losses equal to 2.4% of the original portfolio balance, versus our initial lifetime assumption of 2.28%. In this transaction 29% of the initial pool is still outstanding and the 90+ delinquencies, including outstanding repossessions, equal approximately 42% of the current portfolio balance. The worse than-expected-performance, after taking into account the level of credit enhancement in each structure, has prompted a full review of the ratings of the related notes, which will be concluded over the course of the next six months.

Moody's has also factored into its analysis the negative sector outlook for UK non-conforming RMBS. The sector outlook reflects the following expectations of key macro-economic indicators: GDP to contract by 3.8% in 2009, followed by minimal growth of 0.1% in 2010, unemployment to increase to 9.4% by 2010 from 7.2% today, house prices to decrease by over 30% from its peak in 2007 to a trough in 2010 and further increases in personal insolvencies. For detailed information please see Moody's Economy.Com or for transaction specific performance, please refer to Moody's Performance Overviews available on www.moodys.com.

As part of our detailed transaction review, we will reassess for each portfolio its lifetime loss expectation reflecting the collateral performance to date as well as the future macro-economic environment. Moody's will also request, whenever not already available, updated loan-by-loan information to revise its MILAN Aaa credit enhancement. Loan-by-loan information will also permit us to validate our assumptions with regards to which loans have a higher default propensity. The lifetime loss and the MILAN Aaa credit enhancement are the key parameters used by Moody's to calibrate its loss distribution curve, which is one of the core inputs in the cash-flow model.

As part of our review, we will also consider the concerns the FSA raised in its press release published on 22 June 2009. In this press release, the FSA had found continued weaknesses in the way specialist lending firms and third party administrators are handling mortgage arrears and repossessions. One of the effects for the outstanding UK Non-conforming RMBS transactions could be further changes to transaction documentation permitting for example more loan modifications going forward.

Moody's ratings address the expected loss posed to investors by the legal final maturity of the notes. Moody's ratings address only the credit risks associated with the transactions. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors. Moody's will continue to monitor closely the above transactions.

Moody's initially analysed and monitors these transactions using the rating methodology for EMEA RMBS as described in the Rating Methodology reports "Moody's Approach to Rating UK RMBS" published in April 2005, "Moody's Updated Methodology for Rating UK RMBS" published in November 2007 and "Revising Default/Loss Assumptions Over the Life of an ABS/RMBS Transaction" published in December 2008. Please also refer to the "UK Non-Conforming RMBS Q1 2009 Indices", which can be found on www.moodys.com under the Credit Index category of Structured Finance research. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Credit Policy & Methodologies directory.

For further information, please visit our website www.moodys.com or contact Moody's Client Service Desk (+44 20) 7772 5454.

Excel:

www.moodys.com/cust/getdocumentByNotesDocId.asp?criteria=PBS_SF170631

Frankfurt
Marie-Jeanne Kerschkamp
Managing Director
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Giacomo Bonetti
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's places on review for downgrade 13 UK NC RMBS transactions and comments on 14 other UK NC RMBS transactions
No Related Data.
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