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Rating Action:

Moody's takes actions on two Mansard Mortgage UK non-conforming RMBS transactions

23 May 2014

London, 23 May 2014 -- Moody's Investors Service has taken multiple rating actions on various classes of notes issued by Mansard Mortgages 2006-1 PLC and Mansard Mortgages 2007-1 PLC. Improvement in collateral performance, increase in available credit enhancement and the negative impact of correcting the counterparty exposure drove today's rating actions. Specifically, Moody's has: downgraded the ratings of senior notes, confirmed and affirmed the ratings of senior mezzanine notes and upgraded the ratings of mezzanine and junior notes. Please refer to the list of the affected rating at the end of this press release, before the regulatory disclosure section. The list is an integral part of this press release and identifies each affected rating.

The rating of classes A2, M1, M2 and B1 in Mansard Mortgages 2006-1 PLC and of class A2a in Mansard Mortgages 2007-1 PLC were placed on review for upgrade on 16 April 2014, following an increase in available credit enhancement and better than expected collateral performance.

RATINGS RATIONALE

Today's downgrade of senior class A2 notes in both deals reflects the negative impact of correcting the counterparty exposure reference in the transaction modeling to Danske Bank A/S (Baa1/P-2) that acts as an issuer account bank. Confirmation, affirmation and upgrade of mezzanine and junior notes reflect offset of the issuer account bank exposure by the increase in available credit enhancement and better than expected collateral performance.

--- Counterparty exposure to Danske Bank A/S

The ratings of notes in both deals are linked to the rating of Danske Bank A/S ("Danske") acting as issuer account bank and liquidity provider, which limits the transaction maximum achievable ratings to Aa2(sf). The issuer holds collections, reserve account balance and standby liquidity facility drawing balance with Danske (Baa1/P-2) and not with HSBC Bank plc (Aa3/P-1) as Moody's had previously assumed. Moody's considers the replacement trigger as ineffective because Danske continues acting as an issuer account bank following the replacement trigger breach in March 2012. Moody's applied the methodology outlined in "Temporary use of cash in structured finance transactions: Eligible Investment and Bank Guidelines" published in March 2013 in analysing the linkage to Danske.

--- Increase in available credit enhancement

The affected tranches benefited from a substantial increase in available credit enhancement since the last rating action. The increase is driven by (1) the excess spread capture, and (2) deleveraging.

(1) In Mansard 2006-1 Mortgages PLC high cumulative losses resulted in a fully depleted reserve fund and an unpaid balance in the principal deficiency ledger as of the rating action in July 2011. The unpaid balance has since been covered while the reserve fund is 85% funded as of April 2014. In Mansard 2007-1 Mortgages PLC the reserve fund funding has increased from 1% of target as of the rating action in July 2011 to 100% of target as of April 2014.

(2) Notes in both deals further benefit from non-amortising reserve funds and sequential amortisation during periods of weak performance. Mansard 2006-1 Mortgages PLC is amortising sequentially because the reserve fund is not fully funded. Mansard 2007-1 Mortgages PLC is amortising pro-rata since July 2012 when the reserve fund reached its target.

--- Improved collateral performance

Moody's has lowered its loss expectation to 8.7% of the original pool balance in both deals, down from 9.3% in Mansard Mortgages 2006-1 PLC and 9.5% in Mansard Mortgages 2007-1 PLC. Moody's has also lowered its MILAN CE assumption from 40% to 35% in both deals. The loss expectation and the MILAN CE are the two key parameters used by Moody's to calibrate the loss distribution curve, which is one of the inputs into RMBS cash-flow model. Lower expected and stressed loss severities drove the decrease in both expected loss and MILAN. More than half of the collateral in both deals is backed by properties in London and South East that has benefited from the increase in house prices above the UK national average.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

Factors or circumstances that could lead to an upgrade of the ratings include (1) a better than expected performance of the underlying collateral (2) deleveraging of the capital structure and (3) improvements in the credit quality of the transaction counterparties.

Factors or circumstances that could lead to a downgrade of the ratings include (1) a worse than expected performance of the underlying collateral (2) deterioration in the notes' available credit enhancement and (3) deterioration in the credit quality of the transaction counterparties.

The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in March 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

LIST OF AFFECTED RATINGS

Issuer: Mansard Mortgages 2006-1 PLC

....GBP217.5M A2 Notes, Downgraded to Aa2 (sf); previously on Apr 16, 2014 Aa1 (sf) Placed Under Review for Possible Upgrade

....GBP12.5M B1 Notes, Upgraded to B1 (sf); previously on Apr 16, 2014 Caa1 (sf) Placed Under Review for Possible Upgrade

....GBP20M B2 Notes, Upgraded to Caa3 (sf); previously on Jul 25, 2011 Downgraded to Ca (sf)

....GBP65M M1 Notes, Confirmed at Aa3 (sf); previously on Apr 16, 2014 Aa3 (sf) Placed Under Review for Possible Upgrade

....GBP27.5M M2 Notes, Upgraded to Baa1 (sf); previously on Apr 16, 2014 Ba1 (sf) Placed Under Review for Possible Upgrade

Issuer: Mansard Mortgages 2007-1 PLC

....GBP97.5M A2a Notes, Downgraded to Aa2 (sf); previously on Apr 16, 2014 Aa1 (sf) Placed Under Review for Possible Upgrade

....GBP12.5M B1a Notes, Upgraded to B2 (sf); previously on Jul 25, 2011 Downgraded to B3 (sf)

....GBP6.875M B2a Notes, Upgraded to Caa2 (sf); previously on Jul 25, 2011 Downgraded to Caa3 (sf)

....GBP36.25M M1a Notes, Affirmed Aa3 (sf); previously on Jan 22, 2009 Downgraded to Aa3 (sf)

....GBP14.375M M2a Notes, Upgraded to Baa1 (sf); previously on Jul 25, 2011 Downgraded to Baa3 (sf)

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account any third party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of these transactions in the past six months.

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

As the section on loss and cash flow analysis describes, Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Lyudmila Udot
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Mehdi Ababou
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's takes actions on two Mansard Mortgage UK non-conforming RMBS transactions
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