Fitch Affirms Carismi Finance at 'AA+sf'; Outlook Stable

Fitch Ratings has affirmed Carismi Finance Srl (Carismi), a prime Italian RMBS backed by mortgage loans originated by Cassa di Risparmio di San Miniato, as follows:

Class A2 (ISIN IT0004768294) at 'AA+sf'; Outlook Stable

KEY RATING DRIVERS

Strong Credit Enhancement (CE)

The decision to affirm the rating at the current level is largely driven by the strong credit protection available to the senior notes. In the last 12 months, the CE has built up from 38.6% to 45.6% of the current portfolio balance, also as a result of funds released from the amortizing liquidity facility (3.8% of the Class A2 notes balance) that are transferred into the cash reserve (EUR4.7m).

Weakening asset performance

In the last 12 months, late stage arrears (loans with more than three monthly payments overdue) have decreased from 3.7% of the current portfolio balance to 3.2%. Fitch notes that, despite the marginal improvement, late arrears remain higher than the Italian average, which is stable at 1.5%. Over the same period, gross cumulative defaults (defined as loans with more than 18 monthly payments overdue) have increased from 2.2% of the original portfolio balance to 2.9%, while the Italian index marks 4.3%. In Fitch's view, the main risk drivers of Carismi's performance are self-employed and non-national borrowers. While the agency applies more stressful default assumptions to these loans, the available CE is sufficient to support the 'AA+sf' rating.

Payment Interruption Risk Mitigated

Fitch believes that the liquidity facility, together with the presence of a back-up servicer (Cassa di Risparmio di Cesena SpA), adequately protects the transaction from payment interruption risk caused by a disruption in the servicing activity.

RATING SENSITIVITIES

The rating of the notes is capped at 'AA+sf' for Italian structured finance transactions, which is six notches above the sovereign's Long term Issuer Default Rating of 'BBB+'. A change to Italy's sovereign rating could result in a change in the notes' rating.

An abrupt increase in reference interest rates would jeopardise the affordability of borrowers with fixed instalment/variable maturity mortgages and loans originated in a low interest rate environment. Furthermore, due to rising interest rates, the majority of modular loans may switch to fixed-rate, heightening the interest rate mismatch between the portfolio yield and the floating-rate notes.

An increase in the share of the portfolio granted to self-employed and foreign borrowers could lead to a performance deterioration and trigger negative rating actions.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring

Prior to the transaction closing, Fitch did not review the results of a third party assessment conducted on the asset portfolio information.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of Cassa di Risparmio di San Miniato's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis.

--Loan-by-loan data provided by Cassa di Risparmio di San Miniato as at 31 December 2014

--Transaction reporting provided by Cassa di Risparmio di San Miniato as at 31 January 2015

Models

The model below was used in the analysis. Click on the link for a description of the model.

EMEA RMBS Surveillance Model

EMEA RMBS Surveillance Model

Fitch's analysis of Representations, Warranties & Enforcement Mechanisms can be found in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated 26 March 2015 at www.fitchratings.com.

Individual Representations, Warranties and Enforcement Mechanism reports are available for all structured finance transactions initially rated on or after 26 September 2011 at www.fitchratings.com.

Applicable criteria, 'EMEA RMBS Master Rating Criteria', dated 31 March 2015; 'EMEA Residential Mortgage Loss Criteria', dated 31 March 2015; 'EMEA RMBS Cash Flow Analysis Criteria' dated 31 March 2015, 'Criteria Addendum: Italy - Mortgage Loss and Cash Flow Assumptions', dated 5 June 2014; 'Counterparty Criteria for Structured Finance and Covered Bonds' and 'Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum', dated 14 May 2014; 'Global Structured Finance Rating Criteria', dated 31 March 2015; 'Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds', dated 20 February 2015 are available at www.fitchratings.com.

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985154

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