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Announcement:

Moody's review notes in Newgate Funding PLC: Series 2007-3

05 Nov 2010

Approximately GBP117 million of debt securities affected.

London, 05 November 2010 -- Moody's Investors Service has today placed under review for possible downgrade classes Ba, Bb, Cb, D and E (the affected notes) issued by Newgate Funding PLC: Series 2007-3. The review was prompted by the worse-than-expected performance of the collateral backing the notes. According to Moody's analysis, the credit enhancement available under the affected notes is likely to be not fully sufficient to support the loss assumptions for the mortgage portfolio.

TRANSACTION OVERVIEW

Newgate Funding PLC: Series 2007-3 closed in December 2007 and the current pool factor is approximately 82.6%. The assets supporting the notes are first-lien mortgage loans secured by residential properties located in England, Wales, Scotland and Northern Ireland. The transaction was already reviewed in March 2009 on the basis of the performance data as of December 2008. At that time, the expected loss for the mortgage portfolio was increased from 1.88% to 3.5% of the original portfolio balance.

Since December 2008, 90+ arrears (including outstanding repossessions) have increased from 9.8% to 15.3% of the current portfolio balance. However, 90+ delinquencies have decreased by approximately GBP70 million since the peak of 23.6% reached in December 2009. Over the same time horizon, cumulative losses have increased from 0.01% to the current level of 1.43% of the original portfolio balance. In addition, mortgage loans for an amount of 7.5% of the current portfolio balance were previously delinquent by more than 90 days and have been subject to capitalisation of arrears. According to the investor report as of September 2010, 550 loans, corresponding to approximately 10.7% of the current portfolio balance, have had arrears capitalised. The reserve fund is currently at its target level, equal to GBP23,799,400.

TRANSACTION REVIEW

According to the data from the latest investor report, approximately two-thirds of the decrease in the 90+ delinquencies since the arrears peak in December 2009 are associated with arrears capitalisations. Taking into account the performance of the collateral and the levels of arrears capitalisation to date, the performance of the portfolio since the last review has been worse than initially expected. During its analysis, the rating agency has also taken into account the levels of credit enhancement available to absorb the future projected losses on the underlying mortgage portfolio. After performing cash flow sensitivities on the stability of the current ratings, the worse-than-expected performance of the collateral has prompted Moody's to review the ratings of the affected notes for possible downgrade.

The full review of the ratings of the affected notes will take into account the current capital structure and credit enhancement levels. As part of its detailed transaction review, Moody's will fully reassess its lifetime loss expectation reflecting the collateral performance to date as well as the future macro-economic environment. Moody's will also test different distribution of losses, in order to quantify the potential rating impact of a more backloaded loss distribution, which could result from the re-default of loans previously in arrears. Moody's will also use updated loan-by-loan information to revise its MILAN Aaa credit enhancement. Loan-by-loan information will also allow Moody's to validate its 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 our cash-flow model.

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 increase by 1.6% in 2010 and by 2.3% in 2011, unemployment to stay at approximately 7.9% in 2010 and 2011, house prices to remain relatively flat over the next year. For transaction specific performance, please refer to Moody's Performance Overviews available on www.moodys.com.

LIST OF AFFECTED NOTES

The classes of notes affected by today's rating review are detailed below.

Issuer: Newgate Funding PLC: Series 2007-3

....GBP31.2M Ba Notes, A3 (sf) Placed Under Review for Possible Downgrade; previously on Mar 25, 2009 Downgraded to A3 (sf)

....EUR42M Bb Notes, A3 (sf) Placed Under Review for Possible Downgrade; previously on Mar 25, 2009 Downgraded to A3 (sf)

....EUR44M Cb Notes, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Mar 25, 2009 Downgraded to Ba1 (sf)

....GBP12.75M D Notes, B2 (sf) Placed Under Review for Possible Downgrade; previously on Mar 25, 2009 Downgraded to B2 (sf)

....GBP11.5M E Notes, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Mar 25, 2009 Downgraded to Caa2 (sf)

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. The principal methodologies used in rating and/or monitoring this transaction were "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, available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

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

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

London
Barbara Rismondo
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom

Moody's review notes in Newgate Funding PLC: Series 2007-3
No Related Data.
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