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