DBRS Confirms Ratings on Moorgate Funding 2014-1 Plc

DBRS Ratings Limited (DBRS) confirmed the following ratings on the bonds issued by Moorgate Funding 2014-1 Plc (the Issuer):

-- Class A1 Notes confirmed at AAA (sf)
-- Class B1 Notes confirmed at AA (sf)
-- Class C1 Notes confirmed at A (low) (sf)
-- Class D1 Notes confirmed at BBB (low) (sf)
-- Class E1 Notes confirmed at B (sf)
The ratings on the Class A1 to E1 Notes (together, the Rated Notes) address the timely payment of interest and ultimate payment of principal.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Updated default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Rated Notes to cover the expected losses at their respective rating levels.

Moorgate Funding 2014-1 Plc is a securitisation of first-ranking U.K. non-conforming residential mortgages originated by Mortgages PLC Group, Wave Lending Limited, Close Brothers Limited, Paragon Mortgages Limited and Edeus Mortgages Creators Limited. The mortgage portfolio is serviced by Mortgages PLC, with Homeloan Management Limited acting as the back-up servicer.

PORTFOLIO PERFORMANCE
As of August 2017, the 90+ delinquency ratio was 4.0%, up from 3.8% in August 2016. The cumulative default ratio was 2.2%.

CREDIT ENHANCEMENT
As of the September 2017 payment date, Class A1 credit enhancement was 45.9%, up from 34.7% at the initial DBRS rating. Class B1 credit enhancement was 31.5%, up from 23.7% at the initial DBRS rating. Class C1 credit enhancement was 19.9%, up from 14.9% at the initial DBRS rating. Class D1 credit enhancement was 15.1%, up from 11.3% at the initial DBRS rating. Class E1 credit enhancement was 8.1%, up from 6.0% at the initial DBRS rating. Credit enhancement in each case is provided by subordination of junior classes as well as a Principal Reserve Fund and the Principal Residual Certificates.

As of the September 2017 payment date, the Principal Reserve Fund was at the target level of GBP 10.2 million. It was initially funded at 1.0% of the initial balance of the Rated Notes and is allowed to grow up to a size of 2.1% of the initial balance of the Rated Notes. The transaction also includes a Class A1 Reserve Fund and a Class B1 Reserve Fund. The Class A1 Reserve Fund provides liquidity support to the Class A1 Notes and was at GBP 2.5 million as of the September 2017 payment date. The Class B1 Reserve Fund, which provides liquidity support to the Class A1 and B1 Notes, was at GBP 1.5 million atthat time.

Citibank N.A., London Branch acts as the account bank for each transaction. The DBRS private rating of Citibank N.A., London Branch complies with the Minimum Institution Rating, given the rating assigned to the Class A1 Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in these transactions are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

The sources of data and information used for these ratings include reports and loan-level data provided by Citibank N.A., London Branch and European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis. At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 20 December 2016, when DBRS confirmed the ratings on the Rated Notes following the publication of DBRS’s “European RMBS Insight: U.K. Addendum”.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS expected a lifetime Base Case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base-case assumptions and therefore have a negative effect on credit ratings.
-- The Base Case PD and LGD of the current pool of loans for the Issuer are 17.7% and 26.4%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increases by 50%, the rating of the Class A1 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A1 Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A1 Notes would be expected to fall to A (high) (sf).

Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD, expected rating of AAA (sf).
-- 50% increase in PD, expected rating of AAA (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf).

Class B1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf).
-- 50% increase in LGD, expected rating of A (sf).
-- 25% increase in PD, expected rating of AA (sf).
-- 50% increase in PD, expected rating of AA (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf).

Class C1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in LGD, expected rating of BBB (sf).
-- 25% increase in PD, expected rating of BBB (sf).
-- 50% increase in PD, expected rating of BB (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (sf).

Class D1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (low) (sf).
-- 50% increase in LGD, expected rating of BB (high) (sf).
-- 25% increase in PD, expected rating of BB (sf).
-- 50% increase in PD, expected rating of B (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (sf).

Class E1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating below B (sf).
-- 50% increase in LGD, expected rating below B (sf).
-- 25% increase in PD, expected rating below B (sf).
-- 50% increase in PD, expected rating below B (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating below B (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating below B (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 24 April 2014

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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- European RMBS Insight: U.K. Addendum
-- Unified Interest Rate Model for European Securitisations

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375