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Rating Action:

Moody's takes action on notes issued by Great Hall Mortgages No.1 plc

24 Sep 2009

Approximately GBP 1.2 billion of debt securities affected.

London, 24 September 2009 -- Moody's Investors Service has today downgraded the ratings of 17 classes of notes and has confirmed the ratings of 2 classes of notes issued by Great Hall Mortgages No.1 plc Series 2007-1 and Series 2007-2. The 19 affected tranches, listed below, had been placed on review for possible downgrade on 26 June 2009 due to worse-than-expected collateral performance. Today's rating actions conclude the review and take into account the increased loss expectations for the two mortgage portfolios backing Great Hall Mortgages No.1 plc Series 2007-1 and Great Hall Mortgages No.1 plc Series 2007-2 (together "the Affected Transactions").

Great Hall Mortgages No.1 plc Series 2007-1 closed in March 2007 and the current pool factor is approximately 72%. The assets supporting the notes are first-ranking mortgage loans secured on residential properties located in England and Wales, with approximately 81% of the outstanding portfolio being composed of interest-only loans. The weighted average LTV at closing was approximately 84% while the current weighted average indexed LTV has increased to approximately 91%. As a result of the house price depreciation after closing, approximately 23% of the outstanding portfolio is currently characterized by an indexed LTV higher than 100%.

The cumulative losses realized since closing in Great Hall Mortgages No.1 plc Series 2007-1 amount to 1.22% of the original portfolio balance, with an average loss severity of approximately 30%. Total delinquencies (excluding loans in repossession) amount to approximately 20.5% of the current portfolio balance, while repossessions equal 1.12% of the current portfolio balance. The reserve fund, fully funded at closing, is currently equal to GBP 9,937,922, which corresponds to 75% of its target level.

Great Hall Mortgages No.1 plc Series 2007-2 closed in June 2007 and the current pool factor is approximately 84%. The assets supporting the notes are first-ranking mortgage loans secured on residential properties located in England and Wales, with approximately 78% of the outstanding portfolio being composed of interest-only loans. The weighted average LTV at closing was approximately 84% while the current weighted average indexed LTV has increased to approximately 93%. As a result of the house price depreciation after closing, approximately 38% of the outstanding portfolio is currently characterized by an indexed LTV higher than 100%.

The cumulative losses realized since closing in Great Hall Mortgages No.1 plc Series 2007-2 amount to 1.09% of the original portfolio balance, with an average loss severity of approximately 30%. Total delinquencies (excluding loans in repossession) amount to approximately 23.09% of the current portfolio balance, while repossessions equal 1.30% of the current portfolio balance. The reserve fund, fully funded at closing, is currently equal to GBP 5,570,836, which corresponds to 60% of its target level.

In the last quarter, the delinquent loans have decreased from approximately GBP132 million to GBP125 million in Great Hall Mortgages No.1 plc Series 2007-1 and from GBP151 million to GBP144 million in Great Hall Mortgages No.1 plc Series 2007-2. The ability of these borrowers to cure their arrears coincides with a benign interest rate environment for the floating rate mortgages, which currently represent approximately 91% of the outstanding portfolio in Great Hall Mortgages No.1 plc Series 2007-1 and approximately 72% of the outstanding portfolio in Great Hall Mortgages No.1 plc Series 2007-2. Moody's has taken into account that such payment ability could be put at risk in case the interest rate environment became less favorable in the medium-long term.

Both the Affected Transactions are exposed to unhedged basis risk between the 3-Month-GBP-Libor due on the notes and the interest received on the mortgage loans ultimately linked to the BBR, representing approximately 65% of the current portfolio balance in Great Hall Mortgages No.1 plc Series 2007-1 and 53% of the current portfolio balance in Great Hall Mortgages No.1 plc Series 2007-2. Although Moody's has taken into account revised assumptions for excess spread reduction due to unhedged basis risk, the worse-than-expected collateral performance, rather than the unhedged basis risk, is the main driver of today's rating actions.

Moody's has assessed updated loan-by-loan information of the outstanding portfolio to determine the increase in credit support needed and the volatility of future losses. As a consequence, Moody's has revised its Milan Aaa CE to 26.5% and to 27.5% for Great Hall Mortgages No.1 plc Series 2007-1 and Series 2007-2 respectively (vs. the previous assumption of 20.9% and 19.8% for Great Hall Mortgages No.1 plc Series 2007-1 and 2007-2 respectively). The current credit enhancement available below the Class A notes (excluding excess spread) equals approximately 29.4% in Great Hall Mortgages No.1 plc Series 2007-1 and 24.5% in Great Hall Mortgages No.1 plc Series 2007-2.

Taking into account the current amount of realized losses, and completing a roll-rate and severity analysis for the non-defaulted portion of the portfolio, Moody's has also increased its total loss expectations to 5% and 6% of the original portfolio balance for Great Hall Mortgages No.1 plc Series 2007-1 and Series 2007-2 respectively (vs. 1.85% and 1.95% previously assumed).

The loss expectation and the Milan Aaa CE are the two key parameters used by Moody's to calibrate the loss distribution curve, which is one of the inputs into our RMBS 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 contract by 4.3% in 2009, followed by growth of 1.0% in 2010, unemployment to increase to 9.5% by 2010 from 7.8% today, house prices to decrease by around 25% from their peak in 2007 to a trough in 2010 and further increases in personal insolvencies. For more detailed information please refer to Moody's Economy.Com.

The classes of notes affected by today's rating actions are:

Great Hall Mortgages No.1 plc Series 2007-1:

- Class A2a, confirmed at Aaa; previously on 26 June 2009 Aaa and placed under review for possible downgrade;

- Class A2b, confirmed at Aaa; previously on 26 June 2009 Aaa and placed under review for possible downgrade;

- Class Ba, downgraded to Aa3; previously on 26 June 2009 Aa2 and placed under review for possible downgrade;

- Class Bb, downgraded to Aa3; previously on 26 June 2009 Aa2 and placed under review for possible downgrade;

- Class Ca, downgraded to Baa3; previously on 26 June 2009 A2 and placed under review for possible downgrade;

- Class Cb, downgraded to Baa3; previously on 26 June 2009 A2 and placed under review for possible downgrade;

- Class Da, downgraded to B2; previously on 26 June 2009 Baa3 and placed under review for possible downgrade;

- Class Db, downgraded to B2; previously on 26 June 2009 Baa3 and placed under review for possible downgrade; and

- Class Ea, downgraded to Ca; previously on 26 June 2009 Ba2 and placed under review for possible downgrade.

Great Hall Mortgages No.1 plc Series 2007-2:

- Class Aa, downgraded to Aa1; previously on 26 June 2009 Aaa and placed under review for possible downgrade;

- Class Ab, downgraded to Aa1; previously on 26 June 2009 Aaa and placed under review for possible downgrade;

- Class Ac, downgraded to Aa1; previously on 26 June 2009 Aaa and placed under review for possible downgrade;

- Class Ba, downgraded to A3; previously on 26 June 2009 Aa2 and placed under review for possible downgrade;

- Class Ca, downgraded to Ba2; previously on 26 June 2009 A2 and placed under review for possible downgrade;

- Class Cb, downgraded to Ba2; previously on 26 June 2009 A2 and placed under review for possible downgrade;

- Class Da, downgraded to Caa2; previously on 26 June 2009 Baa2 and placed under review for possible downgrade;

- Class Db, downgraded to Caa2; previously on 26 June 2009 Baa2 and placed under review for possible downgrade;

- Class Ea, downgraded to Ca; previously on 26 June 2009 Ba1 and placed under review for possible downgrade; and

- Class Eb, downgraded to Ca; previously on 26 June 2009 Ba1 and placed under review for possible downgrade.

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 monitoring these transactions are "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, as well as the Special Report "Interest Rate Risks in UK RMBS -- Moody's approach" published in October 2007, 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. Please also refer to the "UK Non-Conforming RMBS Q2 2009 Indices" available on www.moodys.com in the Structured Finance sub-directory under the Research & Ratings tab. 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
Barbara Rismondo
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
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 takes action on notes issued by Great Hall Mortgages No.1 plc
No Related Data.
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