New Issue: Jupiter Mortgage No.1 PLC - S&P Global

New Issue: Jupiter Mortgage No.1 PLC

Primary Credit Analyst:

Vedant Thakur, London + 44 20 7176 3909; [email protected]

Secondary Contact:

Philip Bane, Dublin + 353 1 568 0623; [email protected]

Table Of Contents

Transaction Summary

Originator

Servicing

Collateral

Credit Analysis And Assumptions

Macroeconomic And Sector Outlook

Transaction Summary

Cash Flow Assumptions And Analysis

Scenario Analysis

Sovereign Risk

Counterparty Risk

Surveillance Analysis

Appendix

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Table Of Contents (cont.)

Related Criteria

Related Research


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Ratings' permission. See Terms of Use/Disclaimer on the last page.

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Ratings Detail

Ratings

Class Rating*

Amount

(mil. £)

Initial credit

enhancement (%)§ Interest† Step-up margin

Step-up

date

Legal final

maturity

A AAA (sf) 2,327.031 20.00 Compounded daily

SONIA plus 0.80%

Compounded daily

SONIA plus 1.20%

January

2024

July 2060

B-Dfrd AA+ (sf) 178.453 13.75 Compounded daily

SONIA plus 1.40%

Compounded daily

SONIA plus 2.10%

January

2024

July 2060

C-Dfrd AA (sf) 42.829 12.25 Compounded daily

SONIA plus 1.70%

Compounded daily

SONIA plus 2.55%

January

2024

July 2060

D-Dfrd AA- (sf) 49.967 10.50 Compounded daily

SONIA plus 1.90%

Compounded daily

SONIA plus 2.85%

January

2024

July 2060

E-Dfrd A (sf) 57.105 8.50 Compounded daily

SONIA plus 2.50%

Compounded daily

SONIA plus 3.50%

January

2024

July 2060

F-Dfrd BBB+ (sf) 49.967 6.75 Compounded daily

SONIA plus 3.00%

Compounded daily

SONIA plus 4.00%

January

2024

July 2060

G-Dfrd BBB- (sf) 42.829 5.25 Compounded daily

SONIA plus 3.50%

Compounded daily

SONIA plus 4.50%

January

2024

July 2060

H-Dfrd BB- (sf) 35.691 4.00 Compounded daily

SONIA plus 3.75%

Compounded daily

SONIA plus 4.75%

January

2024

July 2060

I-Dfrd B- (sf) 42.828 2.50 Compounded daily

SONIA plus 4.00%

Compounded daily

SONIA plus 5.00%

January

2024

July 2060

Z NR 28.552 0.00 0.00% 0.00% January

2024

July 2060

X-Dfrd CCC (sf) 42.828 0.00 Compounded daily

SONIA plus 4.00%

Compounded daily

SONIA plus 4.00%

January

2024

July 2060

S1 certificate NR N/A N/A 0.08% N/A January

2024

July 2060

S2 certificate NR N/A N/A N/A 0.08% January

2024

July 2060

Y certificate NR N/A N/A N/A N/A N/A July 2060

VRR loan

notes

NR 152.531 N/A N/A N/A N/A July 2060

*Our ratings address timely receipt of interest and ultimate repayment of principal for the class A notes, and the ultimate payment of interest and

principal on the other rated notes. §As a percentage of 95% of the total pool balance for the class A to X-Dfrd notes. †This is the credit

enhancement based on subordination plus the reserve fund, expressed as a percentage of collateral amount including loans with past maturities.

N/A--Not applicable. NR--Not rated. SONIA--Sterling Overnight Index Average.

Transaction Summary

• Jupiter Mortgage No.1 PLC is a static RMBS transaction that securitizes a portfolio of £3.005 billion owner-occupied

and buy-to-let (BTL) mortgage loans secured on properties in the U.K.

• At closing, the seller (Jupiter Seller Ltd.) purchased the beneficial interest in the portfolio from the sponsor (Citibank

N.A., London Branch), who in turn acquired the portfolio from the original sellers, NRAM Ltd. and Bradford and

Bingley PLC (B&B). The issuer used the issuance proceeds to purchase the full beneficial interest in the mortgage


© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer on the

last page.

2608687

loans from the seller. The issuer granted security over all of its assets in favor of the security trustee.

• The pool is well seasoned. Most of the loans are first-lien U.K. owner-occupied and BTL residential mortgage loans,

however the pool includes a small percentage of retirement interest-only loans and lifetime mortgage loans. The

borrowers in this pool may have previously been subject to a county court judgement (CCJ; or the Scottish

equivalent), an individual voluntary arrangement, a bankruptcy order, may be self-employed, have self-certified their

incomes, or were otherwise considered by banks and building societies to be nonprime borrowers. The loans are

secured on properties in England, Wales, Scotland, and Northern Ireland, and were mostly originated between 2003

and 2009.

• Of the pool, which is current on payments, 1.07% of the mortgage loans by current balance are currently granted

payment holidays due to COVID-19. There is high exposure to interest-only loans in the pool at 92.8%, and 9.3% of

the mortgage loans are currently in arrears greater than (or equal to) one month.

• A general reserve fund provides liquidity, and principal can be used to pay senior fees and interest on the notes

subject to various conditions. A further liquidity reserve fund is funded to provide liquidity support to the class A

and B-Dfrd notes.

• B&B is the servicer in this transaction, and Computershare Mortgage Services Ltd. (CMS) is the delegated servicer.

• There are no rating constraints in the transaction under our counterparty, operational risk, or structured finance

sovereign risk criteria. We consider the issuer to be bankruptcy remote.

• Our credit and cash flow analysis and related assumptions consider the transaction's ability to withstand the

potential repercussions of the COVID-19 outbreak, namely, higher defaults and longer recovery timing. Considering

these factors, we believe that the available credit enhancement is commensurate with the assigned ratings. As the

situation evolves, we will update our assumptions and estimates accordingly.

The Credit Story

Strengths Concerns and mitigating factors

The pool is well-seasoned with a weighted-average

seasoning of more than 10 years for almost the full pool.

In our view, more-seasoned performing loans exhibit

lower risk profiles than less-seasoned loans.

The borrowers in this pool have previously been subject to a prior county court

judgement (13.1%), an individual voluntary arrangement, a bankruptcy order (1.6%),

may be self-employed (48.60%), have self-certified their incomes (28.0%), or were

otherwise considered by banks and building societies to be nonprime borrowers. We

consider that loans with these characteristics are more likely to exhibit a higher

historical default probability than otherwise-similar loans. We have addressed these

features accordingly in our credit analysis.

The pool has a low current indexed loan-to-value (LTV)

ratio of 63.1%, which is most likely to incur lower loss

severities if the borrower defaults.

There is a high proportion (92.8%) of interest-only loans in the pool. We understand

when the maturity of a loan is reached, but it is yet to be redeemed, in some cases,

the servicer does not automatically classify a loan as default, but where possible,

allows for short term extensions for the borrower to refinance or sell without the

need for litigation. In order to address this point, we have run an additional sensitivity

in our cash flow analysis to test a 12-month maturity extension for the interest-only

loans in the pool.

The application of principal proceeds is fully sequential.

Credit enhancement can therefore build up over time for

the rated notes, enabling the capital structure to withstand

performance shocks.

Of the pool,9.3% comprises loans in arrears, including 6.4% in over 90 days'

delinquency. We reflected these features in our foreclosure frequency assumptions.

The transaction features a non-amortizing general reserve,

which was fully funded at closing and will provide credit

enhancement and liquidity for the collateralized notes to

meet revenue shortfalls. The transaction can also use

principal receipts to pay senior fees and interest on the

notes subject to various conditions. The transaction also

features an amortizing liquidity reserve fund to provide

liquidity to the class A and B-Dfrd notes.

There is a minor exposure to lifetime mortgage loans (0.002%) and retirement

interest-only loans (0.120%). In our analysis, we have not given any credit to lifetime

mortgage loans and have only given to credit to interest received prior to legal final

of the transaction on the retirement interest-only loans. This is because the principal

repayment on these loans is based on the borrowers' mortality rate, which could be

after the transaction's legal maturity.



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The Credit Story (cont.)

Strengths Concerns and mitigating factors

Any losses on the portfolio and any use of principal as

available revenue receipts would result in the issuer

recording an amount in the principal deficiency ledger

(PDL). This will provide additional protection to the notes

as excess spread can be used to pay down the notes.

Of the portfolio, 1.84% of the loans have either passed their maturity or are currently

under a repossession/foreclosure process. In our analysis, we have assumed these

loans to be defaulted and have applied a stressed rating specific recovery rate.

Under our base-case scenario, there is a positive excess

spread providing credit enhancement in this transaction,

given 33% of the pool has exposure to loans based on a

standard variable rate (SVR) with weighted-average

interest rate close to 4.4% on these loans.

We received a 99/1 pool audit report for this transaction and there are significant

missing files in the audit. Most of the errors related results are explained by the fact

that different originators were consolidated in one entity throughout the years and

documents could have been lost or databases not synchronized correctly. We

consider the loans' high seasoning as one of the mitigants to fraud risk as the loans

have been outstanding for more than 10 years. However, we have applied

adjustments to our weighted-average foreclosure frequency (WAFF) given the errors

in the report.

B&B is the administrator in the transaction; however, the

servicing is delegated to CMS. Since CMS also provides

third-party servicing, it has well-established and fully

integrated servicing systems and policies.

As the beneficial title seller is a special-purpose entity, it has limited resources to

meet its financial obligations and is not the originator of the mortgages. It will not

have any buy-back obligation for the ineligible receivables, but rather an obligation to

indemnify the issuer. We consider the seller's responsibility for breaching the package

to be weaker than what we normally see in U.K. RMBS transactions. We have

therefore increased our WAFF estimates to address this risk.

Given the presence of legacy collateral including

interest-only loans and loans based on SVR, the

transaction features indemnity payments from the seller to

the issuer against any successful claims from the

borrowers with respect to mis-selling of mortgages with,

among other things, payment protection insurance,

discretionary rate, interest-only, and any arrears charges.

There is no swap to hedge the mismatch between the interest rate paid under the

loans (SVR, bank base rate, or three-month LIBOR) and the interest rate paid under

the notes (daily SONIA). We have therefore stressed for basis risk in our analysis. To

cover the risk of reduction in standard variable rate we have applied a haircut in our

analysis.

The Financial Conduct Authority's (FCA) guidance provides that lenders could not

start or continue repossession due to the COVID-19 pandemic until October 2021.

This could delay the recoveries from defaulted mortgage loans. We have tested the

sensitivity of extended recovery timing assumptions by nine months in our analysis

and the ratings remain robust. Of the borrowers in the pool who are currently not in

arrears, 2.4% have been granted payment holidays as of the cut-off date. We have

considered these factors in our credit analysis. Our cash flow analysis also

incorporates liquidity stresses to capture the risk of payment holidays.

Originator

The pool comprises well-seasoned mortgage loans currently held with UK Asset Resolution Ltd. (UKAR). UKAR was

established on Oct. 1, 2010, and is facilitating the orderly wind down of NRAM's and B&B's government-owned

businesses, including its subsidiary Mortgage Express Ltd. At inception, UKAR's book had a balance about £115 billion,

which is now down by almost 90%.

The pool comprises three sub-pools, as outlined in the table below.

Table 1

Pool Composition

Sub-pool 1 Sub-pool 2 Sub-pool 3

Originator NRAM PLC and

Legal & General

Bank Ltd.

Bradford and Bingley PLC, Mortgage Express Ltd.,

GMAC-RFC Ltd., Kensington Mortgage Company Ltd.,

Close Brothers Ltd., and Keystone Buy to Let Mortgages

Ltd.

Bradford and Bingley PLC, Mortgage

Express Ltd., GMAC-RFC Ltd., and

Kensington Mortgages Group Ltd.

Original seller NRAM PLC Bradford and Bingley PLC Bradford and Bingley PLC



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Table 1

Pool Composition (cont.)

Sub-pool 1 Sub-pool 2 Sub-pool 3

Occupancy

type

Buy to let Buy to let Owner occupied

Percentage of

pool

33% 23% 44%

The original sellers, NRAM and B&B, are wholly owned subsidiaries of UKAR.

Servicing

B&B is the interim servicer for the loans, with a delegation to CMS to act on B&B's behalf. Following the sale of the

assets from the original sellers to the sponsor and then on to the issuer, B&B will continue to be the servicer for the

pool's loans until the effective date as the interim servicer. After the effective date, B&B will be appointed as the

transaction's long-term servicer. The interim servicing agreement gives the issuer the right to appoint a third-party

servicer if the transfer doesn't take place.

CMS is an Australian global finance company, which has permission from the Financial Conduct Authority (FCA) to

administer regulated mortgage contracts in the U.K. via its Computershare Loan Servicing (CLS) division. CLS is now

the U.K.'s leading third-party mortgage administrator, servicing prime, nonconforming, BTL, flexible, and

lifetime/reverse mortgages. In June 2016, CLS won the mandate to manage approximately £30 billion on UKAR's

behalf, absorbing 1,700 former UKAR staff (for more details, see "Servicer Evaluation: Computershare Loan Services

(HML)," published on Feb. 3, 2020).

We reviewed CMS' servicing and default management processes and are satisfied that they are capable of performing

their functions in the transaction. The company has an experienced leadership team with good experience in the

financial services industry, and we view its compliance and risk management structure as robust. We are comfortable

that there are adequate staff levels and supportive information technology systems to continue to effectively service

the loans in the pool.

CMS confirmed that it has a business continuity plan in place to manage the COVID-19 outbreak. Technology

solutions enable the staff to have remote access to the servicing platform, and personnel can keep interacting with

customers via phone calls, text messages, and the website. Borrowers can make payments via Interactive Voice

Response, such as by telephone with credit cards, or online through a web portal if they have a direct debit account.

Collateral

We have received loan-level data as of January 2020. We have also received historical performance data (since 2008)

for the loans in pool. The quality of data provided is in line with our standards. We received a 99/1 pool audit report

for this transaction and there are significant missing files in the audit. Most of the errors related results are explained

by the fact that different originators were consolidated in one entity throughout the years and documents could have



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been lost or databases not synchronized correctly. We consider the loans' high seasoning as one of the mitigants to

fraud risk as the loans have been outstanding for more than 10 years. However, we have applied adjustments to our

WAFF given the errors in the report.

The beneficial title seller is a special-purpose entity. It did not originate the loans, and it has limited resources to meet

its financial obligations. While the seller provides certain representations and warranties on the assets, it has no

buy-back obligation. It will indemnify the issuer against any breach in assets in the warranties, but its ability to meet

this obligation depends on the ability to settle a similar claim against the sponsor. We consider the seller's

responsibility for breaching the package to be weaker than what we normally see in U.K. RMBS transactions, and we

have increased the originator adjustment to incorporate this risk.

Table 2

Collateral Key Features*

Jupiter Mortgage No.1 PLC

Chester B1 Issuer

PLC Durham Mortgages B PLC

Pool cut-off date Jan. 31, 2020 Dec. 31, 2019 May 23, 2018

Jurisdiction U.K. U.K. U.K.

Originators NRAM Ltd., Legal & General Bank Ltd.,

Bradford & Bingley PLC, Mortgage Express

PLC, GMAC–RFC Ltd., Kensington Mortgage

Company Ltd., and Close Brothers Ltd.

NRAM Ltd. Bradford & Bingley PLC, Mortgage

Express PLC, GMAC–RFC Ltd.,

Kensington Mortgage Company Ltd.,

and Close Brothers Ltd.

Principal outstanding of the

preliminary pool (bil. £)

3.01 1.71 2.29

Number of properties 23,632 18,718 23,901

Average loan balance (£) 120,129 93,866 96,188

Weighted-average indexed

current LTV ratio (%)

63.10 71.30 69.56

Weighted-average original LTV

ratio (%)

82.07 98.40 81.14

Weighted-average seasoning

(months)

172.00 156.00 139.10

Top two regional concentration

(by balance)

South East incl. London (38.5%) and North

West (14.6%)

South East incl.

London (19.1%) and

North West (15.8%)

South East England incl. London

(34.6%), and North West (12.3%)

Buy-to-let (%) 54.00 5.60 100.00

More than one CCJ (%) 13.00 17.70 7.76

Interest only and part and part

(%)

92.80 43.80 95.32

Jumbo valuations (%) 4.40 0.50 8.72

Current arrears greater than or

equal to one month (%)

9.30 11.00 0.81

*Calculations are according to S&P Global Ratings' methodology. LTV--Loan-to-value.

Asset description

The portfolio comprises first-lien U.K. BTL mortgage loans (54%) and owner-occupied loans (46%), and has a

weighted-average current indexed LTV ratio of 63.1% and a weighted-average original LTV of 82.07%. The pool is

well seasoned with a weighted-average seasoning of 14.3 years and the assets are primarily concentrated in London

and the South-East (38.5%), but no regions breach our concentration limits (see charts 2 and 3).



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The pool also contains loans that have had at least one county court judgement (13%) and borrowers that have

previously been declared bankrupt (1.6%).

Chart 1



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Chart 2



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Chart 3

There is a high proportion (92.8%) of interest-only loans in the pool. We understand when the maturity of a loan is

reached, but it is yet to be redeemed, in some cases, the servicer does not automatically classify a loan as default, but

where possible, allows for short-term extensions for the borrower to refinance or sell without the need for litigation.

Additionally, the FCA issued temporary guidance, which came into force on Oct. 31, 2020, that makes clear that firms

should allow borrowers with interest-only loans that have matured recently or are set to mature soon, and who are

up-to-date with payments, to continue making interest payments and delay repayment of the capital on their mortgage

up to Oct. 31, 2021. Therefore, in our analysis, we have run an additional sensitivity in our cash flow analysis to test a



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12-month maturity extension of interest-only loans in the pool.

Chart 4

Asset performance

As part of our analysis, we have considered previous performance data for each loan in the pool.

The pool has 9.3% of loans in arrears as calculated in accordance with our methodology. We have not incorporated

into our analysis the amount of loans that have had restructuring arrangements and that have been current in the last

36 months, considering the limited portion in the combined pool. Chart 5 below shows arrears at NRAM and B&B

book level. After the financial crisis, the low interest rate environment and the servicing policies contributed to an

arrears reduction. The subsequent rise in arrears in 2017 contributed to various securitizations in which the assets

were positively selected. In terms of asset performance, the level of arrears in the portfolio is high as compared to our

U.K BTL index, but lower than the U.K nonconforming index. There was a marginal increase in arrears recently due to

the pandemic, but arrears have remained largely stable.



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Chart 5

Payment holidays

The pool comprises loans that can take payment holidays, subject to certain underlying conditions. A borrower may

apply to the servicer for a payment holiday--or if the borrower has made a certain number of consecutive payments, it

could take a payment holiday.

Furthermore, 1.07% of the borrowers in the pool who are not in arrears have currently taken COVID-19-related

payment holidays as of the cut-off date. The monthly payments for these borrowers are deferred to a later date, while

interest continues to accrue. Borrowers that are under payment holidays won't be classified as in arrears if they were

previously up to date on payments and any arrears balance is frozen for borrowers who were in arrears when availing

of the payment holiday.

In our view, given the reserve fund's and the liquidity reserve's size, and the notes' deferable nature (excluding the

class A notes), the structure can withstand liquidity shocks resulting from payment holidays based on the current level

of payment holidays.

However, some of the borrowers that are currently under payment holidays could move into arrears and/or default on

their mortgage loan. We have incorporated sensitivity stresses to our foreclosure frequency assumptions to factor this

risk. The ratings assigned are able to withstand these stresses.



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Credit Analysis And Assumptions

We have applied our global residential loans criteria to the pool in order to derive the WAFF and the weighted-average

loss severity (WALS) at each rating level.

The WAFF and the WALS assumptions increase at each rating level because notes assigned a higher rating should be

able to withstand a higher level of mortgage defaults and loss severity. We base our credit analysis on the loans, the

properties, and the associated borrowers' characteristics.

Table 3

Portfolio WAFF And WALS

Rating level WAFF (%) WALS (%) Credit coverage (%)

Base foreclosure frequency component for an archetypal U.K.

mortgage loan pool (%)

AAA 33.06 43.43 14.36 12.00

AA 26.73 36.08 9.64 8.10

A 23.33 23.46 5.47 6.10

BBB 19.94 16.37 3.26 4.20

BB 16.19 11.97 1.94 2.20

B 15.32 8.68 1.33 1.75

WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity.

Chart 6



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Macroeconomic And Sector Outlook

Table 4

U.K. Housing Market Statistics

2017 2018 2019 2020f 2021f

Nominal house price, % change y/y 4.6 2.4 1.6 (1.6) (1.9)

Real GDP, % change 1.8 1.3 1.5 (9.7) 7.9

Unemployment rate 4.4 4.1 3.8 4.8 6.3

Sources: S&P Global Ratings, Eurostat, Organisation for Economic Cooperation and Development, Department for Communities and Local

Government, Office for National Statistics. Y/Y--Year on year. f--Forecast.

Based on our macroeconomic forecasts, we revised the 'B' foreclosure frequency assumptions in our global residential

loans criteria for the U.K. archetypal pool to 1.75% from 1.50% (see "Residential Mortgage Market Outlooks Updated

For 13 European Jurisdictions Following Revised Economic Forecasts," published on May 1, 2020).

We have also considered the transaction's ability to withstand additional liquidity stresses and extended foreclosure

timing assumptions. The assigned ratings remain robust under these stresses.

S&P Global Ratings believes there remains high, albeit moderating, uncertainty about the evolution of the coronavirus

pandemic and its economic effects. Vaccine production is ramping up and rollouts are gathering pace around the

world. Widespread immunization, which will help pave the way for a return to more normal levels of social and

economic activity, looks to be achievable by most developed economies by the end of the third quarter. However,

some emerging markets may only be able to achieve widespread immunization by year-end or later. We use these

assumptions about vaccine timing in assessing the economic and credit implications associated with the pandemic (see

our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates

accordingly.

Given the dynamic/fluid circumstances associated with the coronavirus pandemic, we will continually evaluate and

update this disclaimer as warranted.

Transaction Summary

Chart 7



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At closing, the issuer purchased the beneficial interest in the portfolio of U.K. residential mortgages from the seller

(Jupiter Seller), using the proceeds from the issuance of the notes, certificates, and VRR loan notes.

The issuer is an English special-purpose entity, which we consider to be bankruptcy remote. We analyzed its corporate

structure in line with our legal criteria.

Interest will be paid quarterly on the interest payment dates, beginning in April 2021. The rated notes pay interest

equal to compounded daily SONIA plus a class-specific margin, with a further step up margin following the optional

call date in January 2024. All of the notes will reach legal final maturity in July 2060.

Indemnity payments

Given the presence of legacy collateral including interest-only loans and loans based on SVR, the transaction features

indemnity payments from the seller to the issuer against any successful claims from the borrowers regarding



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mis-selling of mortgages with, among other things, payment protection insurance, discretionary rate, interest-only, and

any arrears charges.

VRR loan notes

The size of the VRR loan notes represents 5% of the collateral. On every interest payment date (IPD), revenue and

principal collections (after deducting senior expenses) are split in a 95/5 proportion between noteholders and

certificate holders, on one hand, and the VRR loan noteholders, on another. Then the funds are distributed within each

group in accordance with the payment waterfall. The VRR loan noteholders do not have separate ability to accelerate

the amounts owed in respect of VRR loan notes, or to direct the note trustee or the security trustee in the enforcement

of the security. Our analysis does not address the issuer's ability to make interest and principal payments on VRR loans

notes.

Class S1 and S2 certificates

The class S1 and S2 certificates represent senior deferred consideration payable by the issuer to the seller. The class

S1 certificates are entitled to receive 0.08% of the current collateral balance prior to the step-up date, and no payments

thereafter. The class S2 certificates are entitled to receive 0.10% of the current collateral balance after the step-up date,

and no payments beforehand. Given that the payments due on the class S1 and S2 certificates rank pari passu with the

class A notes interest, they are addressed in our cash flow model.

Deferral of interest

Under the transaction documents, interest payments on all classes of rated notes (excluding the class A notes) can be

deferred. Consequently, any deferral of interest on the class B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, F-Dfrd, G-Dfrd, H-Dfrd,

I-Dfrd, and X-Dfrd notes would not constitute an event of default. Deferred interest will accrue interest and will

become due and payable on the legal final maturity date.

Our ratings address the timely payment of interest and the ultimate payment of principal on the class A notes and the

ultimate payment of interest and principal on the other rated notes.

General reserve fund and liquidity reserve fund

A non-amortizing reserve fund was funded at closing. It comprises two elements:

• The liquidity reserve fund, which was funded at closing to 1.5% of the class A and B-Dfrd notes' outstanding balance

and will amortize in line with the class A and B-Dfrd notes. It is available to cover shortfalls on the senior expenses,

payments on the class S1 and S2 certificates, and interest payments on the class A and B notes.

• The general reserve fund, which was funded at closing to 1.5% of the class A to Z-Dfrd notes' initial balance less the

amount standing to the credit of the liquidity reserve fund on each interest payment date. As the class A and B-Dfrd

notes amortize, the general reserve fund will build up to provide additional credit enhancement to the notes still

outstanding.

Principal to pay interest

In high-delinquency scenarios, there may be liquidity stresses, whereby the issuer would not have sufficient revenue

receipts to pay interest due on senior fees, payments due on the class S1 and S2 certificates, or the most-senior class of

notes. To mitigate this risk the issuer can use any existing principal receipts. The use of principal to pay interest would

result in the registering of a PDL and may reduce the credit enhancement available to the notes.



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Principal deficiency ledgers

The PDL comprises 10 subledgers, one for each of the rated asset-backed classes of notes.

Amounts will be recorded on the PDL if the portfolio suffers any losses and if the transaction uses principal as available

revenue receipts or to fund the reserve fund.

Revenue priority of paymentsTable 5

Priority of Payments

Revenue priority of payments Principal priority of payments

Senior fees. Interest shortfalls on senior and servicer fees as well as the most senior notes

outstanding by using principal addition amounts.

Senior servicer fees. Class A notes' principal.

Other senior fees. Class B-Dfrd notes' principal.

Issuer profit amounts. Class C-Dfrd notes' principal.

Pro rata, the class A notes' interest and class S1 and S2

certificates payments.

Class D-Dfrd notes' principal.

Class A notes' PDL. Class E-Dfrd notes' principal.

Class B-Dfrd notes' interest. Class F-Dfrd notes' principal.

Liquidity reserve fund replenishment Class G-Dfrd notes' principal.

Class B–Dfrd notes' PDL. Class H-Dfrd notes' principal.

Class C-Dfrd notes' interest. Class I-Dfrd notes' principal.

Class C-Dfrd notes' PDL. UKAR Ltd. indemnity payments under the Customer Protection Undertaking.

Class D-Dfrd notes' interest. Class Z notes' principal.

Class D-Dfrd notes' PDL. Class Y certificates payment.

Class E-Dfrd notes' interest.

Class E-Dfrd notes' PDL.

Class F-Dfrd notes' interest.

Class F-Dfrd notes' PDL.

Class G-Dfrd notes' interest.

Class G-Dfrd notes' PDL.

Class H-Dfrd notes' interest.

Class H-Dfrd notes' PDL.

Class I-Dfrd notes' interest.

Class I-Dfrd notes' PDL.

General reserve fund replenishment

Class Z notes' PDL.

Class X notes' interest.

Class X notes' principal.

Excess to certificate holders.

UKAR Ltd. indemnity payments under the Customer

Protection Undertaking.

Class Y certificates payment.

PDL--Principal deficiency ledger.



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Cash Flow Assumptions And Analysis

We stress the transaction's cash flows to test the credit and liquidity support that the assets, subordinated tranches,

and cash reserve provide.

We apply these stresses to the cash flows at all relevant rating levels. In our stresses on the class A notes, all notes

must pay full and timely principal and interest. Our ratings on the class B-Dfrd to X-Dfrd notes address the payment of

ultimate principal and interest.

Our standard cash flow analysis indicates that the available credit enhancement for the class E-Dfrd, F-Dfrd, G-Dfrd,

and H-Dfrd notes is commensurate with higher ratings than those currently assigned. However, the ratings on these

notes also reflect their ability to withstand the potential repercussions of the COVID-19 outbreak, including higher

defaults and longer foreclosure timing stresses, also considering their relative positions in the capital structure, and the

potential increased exposure to potential tail-end risk.

The class I-Dfrd notes face minor shortfalls under our standard cashflow analysis at the 'B' rating level. However, in

our view, based on cashflow results in a steady state scenario (applying actual level of fees and prepayments), and

given the available credit enhancement, payment of ultimate interest and principal on the class I-Dfrd notes is not

dependent upon favorable business, financial, and economic conditions (see "Criteria For Assigning 'CCC+', 'CCC',

'CCC-', And 'CC' Ratings," published on Oct. 1, 2012). We have therefore assigned our 'B- (sf)' rating to this class of

notes.

Due to structural features, payment of interest and principal on the class X-Dfrd notes relies on excess spread. In our

standard cash flow analysis and in the steady state scenario these notes face shortfalls at all rating levels. In our view,

given no credit enhancement and the results of our cashflow analysis, payment of interest and principal on the class

X-Dfrd notes is dependent upon favorable business, financial, and economic conditions (see "Criteria For Assigning

'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," published on Oct. 1, 2012). We have therefore assigned our 'CCC (sf)' rating

to this class of notes.

Interest rate risk

Interest on the notes is equal to daily SONIA plus class-specific margins that step up following the optional redemption

date. The underlying collateral is linked to the Bank of England base rate (BBR), London Interbank Offered Rate

(LIBOR), or to an SVR. There is basis risk for the underlying collateral that is linked to BBR, LIBOR, and SVR, and the

transaction does not benefit from a swap to mitigate this risk. As a result, we stress the historical timing mismatch

between the index paid on the assets and that paid on the liabilities.

When modeling the yield on SVR loans, we considered the servicer's SVR-setting policy. The SVR rate is set at the

lower of the three-month SONIA plus 2.50% and the SVR cap. The servicer calculates the SVR cap monthly based on

the lending rate by the largest mortgage lenders in the U.K., and equal to the third-highest rate on the respective

determination date. The SVR cap is set to address the customer protection law. Based on the historically observed

behavior of SVR cap versus SONIA, we applied basis risk stress to the floor rate of SONIA plus 2.50% in our cash flow

model.



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Spread compression

The asset yield on the pool can decrease if higher-paying assets default or prepay. We have taken this into account in

our cash flow analysis by assuming at a 'AAA' level that the portfolio's weighted-average margin might compress by

0.11%.

Commingling risk

Borrowers pay into a collection account held with National Westminster Bank PLC in the legal title holder's name. All

amounts in the collection account are swept to the transaction account on the next business day.

If the legal title holder were to become insolvent, mortgage collection amounts in the collection account may become

part of the legal titleholder's bankruptcy estate. In order to mitigate this risk, there is a declaration of trust is in place

over the collection account. To address the risk of the collection bank's insolvency, the transaction documents contain

replacement language in line with our counterparty criteria.

Although we believe that the above mechanisms (downgrade language and declaration of trust) mitigate against loss of

collections, we have considered that collections could be delayed in the event of an insolvency. In our analysis we

have therefore applied a liquidity stress of one month of collections.

Fees

Contractually, the issuer is obliged to pay periodic fees to various parties providing services to the transaction such as

servicers, trustees, and cash managers, among others. We have accounted for these in our analysis. In particular, we

have applied a stressed servicing fee of 0.40% (the higher of 1.5x actual fees and 0.40% per year) to account for the

potential increase in costs to attract a replacement servicer, and additionally 0.05% of the legal titleholder fee in line

with our global residential loans criteria. We have modelled other one-off fees, such as the cost of replacing the bank

account, which totals about £100,000.

Setoff risk

There are no employee loans or deposit setoff exposure in the transaction because the seller and legal title holder is

not a deposit-taking institution.

Risk arising from further advances, product switches, and redraws

The issuer must honor any flexible features included in the underlying mortgage contracts, subject to the servicer

confirming the borrower satisfying the relevant conditions. Flexible features include redraws, further advances,

payment holidays, and porting.

Most loans in this pool are flexible loans, which can overpay and then at some point in the future redraw the overpaid

amount. In our view, based on historical data the risks related to set-off due to redraw is limited.

There is exposure to loans with more than one loan part per property due to further advances. In our credit analysis,

we have accounted for further advances already provided to calculate the loan's current LTV ratio and the original

LTV ratio. If there are further advances in future, we will consider them during our surveillance.

The pool comprises loans that can take payment holidays for up to six months, subject to certain underlying

conditions. A borrower may apply to the servicer for a payment holiday--or if the borrower has made a certain number



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of consecutive payments, it could take a payment holiday. Any such payment holiday would be added to the loan's

current balance. We have tested the effect of payment holidays in our cash flow analysis by stressing it on our analysis

and it does not affect our assigned ratings.

Default timing and recoveries

We have used the WAFF and WALS derived under our credit analysis as inputs in our cash flow analysis.

At each rating level, the WAFF specifies the total balance of the mortgage loans we assume to default over the

transaction's life. Defaults are applied on the assets' outstanding balance as of the closing date. We simulate defaults

following two paths (i.e., one front-loaded and one back-loaded) over a six-year period. During the recessionary period

within each scenario, we assume 25% of the expected WAFF is applied annually for three years.

Table 6

Default Timings For Front-Loaded And Back-Loaded Default Curves

Year after closing Front-loaded defaults (% of WAFF per year) Back-loaded defaults (% of WAFF per year)

1 25.0 5.0

2 25.0 10.0

3 25.0 10.0

4 10.0 25.0

5 10.0 25.0

6 5.0 25.0

WAFF--Weighted-average foreclosure frequency.

We assume recoveries (1-WALS) on defaulted assets to be received 18 months after default for owner-occupied

properties and 12 months after default for BTL properties. Foreclosure costs are estimated at 3% of the repossession

value and £5,000.

Our loss severities are based on loan principal and do not give any credit to the recovery of interest accrued on the

loan during the foreclosure process.

Delinquencies

To simulate the effect of delinquencies on liquidity, we model a proportion of scheduled collections equal to one-third

of the WAFF (in addition to assumed foreclosures reflected in the WAFF) to be delayed. We apply this in each of the

first 18 months of the recession, and we assume a full recovery of these delinquencies to occur 36 months after they

arise.

Prepayments

To assess the impact on excess spread and the absolute level of defaults in a transaction we model both high and low

prepayment scenarios at all rating levels.

Table 7

Prepayment Assumptions

High Low

Pre-recession 30.0 4.0

During recession 3.0 3.0



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Table 7

PrepaymentAssumptions (cont.)

High Low

Post-recession 30.0 4.0

Interest rates

We modeled two interest rate scenarios in our analysis: up and down.

We derived the stressed interest rate curves for compounded SONIA by subtracting a spread of 0.25% from the LIBOR

curves we model. There has been a close relationship between the backward-looking compounded SONIA and the

forward-looking LIBOR determined for the same period. However, since SONIA does not include the various risk

premiums reflected in LIBOR, the former has generally been lower. The spread adjustment applied to the interest rate

reflects the lower SONIA rates historically observed.

Summary

In combination, the default timings, recession timings, interest rates, and prepayment rates described above give rise

to eight different scenarios at each rating level.

Table 8

RMBS Stress Scenarios

Total number of scenarios Prepayment rate Interest rate Default timing

8 High and low Up and down Front-loaded and back-loaded

Scenario Analysis

We analyzed the effect of a moderate stress on our WAFF assumptions and its ultimate effect on our ratings on the

notes. We ran two stress scenarios to demonstrate the rating transition of a note, and the results are in line with our

credit stability criteria.

Sovereign Risk

Our long-term unsolicited credit rating on the U.K. is 'AA'. Therefore, our ratings in this transaction are not constrained

by our structured finance sovereign risk criteria.

Counterparty Risk

The issuer is exposed to Citibank, London Branch as the transaction account provider, and Barclays Bank PLC as the

servicers' collection account. The documented replacement mechanisms for the account providers adequately mitigate

the transaction's exposure to counterparty risk in line with our counterparty criteria.



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Table 9

Supporting Ratings

Institution/role Ratings Replacement trigger

Collateral posting

trigger

National Westminster Bank PLC as collection

account provider

A/Negative/A-1 BBB/A-2 N/A

Citibank N.A., London Branch as transaction

account provider*

A+/Stable/A-1 A/A-1 N/A

*Rating derived from the rating on the parent entity. There are no counterparty constraints on the ratings on the notes in this transaction. The

replacement language in the documentation is in line with our current counterparty criteria (see "Counterparty Risk Framework: Methodology

And Assumptions," published on March 8, 2019). For a full list of transaction participants, please refer to the appendix.

Surveillance Analysis

We will maintain surveillance on the transaction until the notes mature or are otherwise retired. To do this, we will

analyze regular servicer reports detailing the performance of the underlying collateral, monitor supporting ratings, and

make regular contact with the servicer to ensure that it maintains minimum servicing standards and that any material

changes in the servicer's operations are communicated and assessed.

Various factors could lead us to lower our ratings on the notes, such as increasing foreclosure rates in the underlying

pool and changes in the pool composition. We have analyzed the effect of increased defaults by testing the sensitivity

of the ratings to two different levels of movements.

Under our scenario analysis, the ratings on the notes in both scenarios would not suffer a rating transition outside of

that considered under our credit stability criteria.

We also conducted additional sensitivity analysis to assess the impact of, all else being equal, increased WAFF and

WALS on our ratings on the notes. For this purpose, we ran eight scenarios by either increasing stressed defaults

and/or reducing expected recoveries as shown in the tables below.

Table 10

Sensitivity Stresses

WALS

WAFF 1.0x 1.1x 1.3x

1.0x Base Case Sensitivity 3 Sensitivity 4

1.1x Sensitivity 1 Sensitivity 5 Sensitivity 7

1.3x Sensitivity 2 Sensitivity 6 Sensitivity 8

WALS--Weighted-average loss severity. WAFF--Weighted-average foreclosure frequency.

The results of the above sensitivity analysis indicate deterioration of the ratings on the notes (see table 11).

Table 11

Sensitivity Analysis Results

Class Base case 1 2 3 4 5 6 7 8

A AAA AAA AAA AAA AAA AAA AA+ AA+ AA+

B-Dfrd AA+ AA AA AA AA AA AA- AA- A+



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Table 11

Sensitivity Analysis Results (cont.)

Class Base case 1 2 3 4 5 6 7 8

C-Dfrd AA AA AA- AA AA- AA- A+ A+ A

D-Dfrd AA- AA- A AA- A+ A+ A A A

E-Dfrd A A A A A A A- A- BBB+

F-Dfrd BBB+ BBB+ BBB BBB+ BBB BBB+ BBB BBB BBB-

G-Dfrd BBB- BBB- BB+ BBB- BB+ BB+ BB BB+ BB

H-Dfrd BB- BB- B BB- BB- BB- B B B-

I-Dfrd B- N/A N/A N/A N/A N/A N/A N/A N/A

X-Dfrd CCC N/A N/A N/A N/A N/A N/A N/A N/A

N/A--Not applicable.

Appendix

The full list of transaction parties (excluding those providing supporting ratings) are listed below.

Transaction Participants

Role Participant

Arranger Citibank Europe PLC, U.K. Branch

Seller Jupiter Seller Ltd.

Servicer and interim servicer Bradford & Bingley PLC

Back-up servicer facilitator CSC Capital Markets UK Ltd.

Legal title holders NRAM Ltd., Bradford & Bingley PLC, Mortgage Express Ltd., Mortgage Express (No. 2), and Scotlife

Home Loans (No.2) Ltd.

Cash manager Citibank, N.A., London Branch

Corporate services provider CSC Capital Markets UK Ltd.

Agent bank and principal paying

agent

Citibank N.A., London Branch

Security trustee U.S. Bank Trustees Ltd.

VRR loan note holder Citibank N.A., London Branch

Related Criteria

• Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of

Structured Finance Securities, Dec. 22, 2020

• Criteria | Structured Finance | General: Methodology To Derive Stressed Interest Rates In Structured Finance, Oct.

18, 2019

• Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8,

2019

• Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities:

Methodology And Assumptions, Jan. 30, 2019



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• Criteria | Structured Finance | RMBS: Global Methodology And Assumptions: Assessing Pools Of Residential

Loans, Jan. 25, 2019

• Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017

• Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance

Transactions, Oct. 9, 2014

• General Criteria: Methodology Applied To Bank Branch-Supported Transactions, Oct. 14, 2013

• General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012

• General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012

• General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

• Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009

Related Research

• European Structured Finance Outlook H2 2020, July 28, 2020

• EMEA Structured Finance Surveillance Chart Book, June 29, 2020

• Investment-Grade U.K. And Dutch RMBS Ratings Likely To Remain Resilient To COVID-19 Effects, June 29, 2020

• How European ABS And RMBS Servicers Are Managing COVID-19 Disruption And Payment Holidays, June 4,

2020

• Government Job Support Will Stem European Housing Market Price Falls, May 15, 2020

• Residential Mortgage Market Outlooks Updated For 13 European Jurisdictions Following Revised Economic

Forecasts, May 1, 2020

• Economic Research: Europe Braces For A Deeper Recession In 2020, April 20, 2020

• COVID-19 May Be A Litmus Test For European RMBS Calls, April 15, 2020

• Will Mortgage Payment Suspensions Related To COVID-19 Affect European RMBS?, March 13, 2020

• European ABS And RMBS: Assessing The Credit Effects Of COVID-19, March 3, 2020

• Servicer Evaluation: Computershare Loan Services (HML), Feb. 3, 2020

• 2017 EMEA RMBS Scenario And Sensitivity Analysis, July 6, 2017

• Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic

Factors, Dec. 16, 2016

• European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic

Factors, Dec. 16, 2016



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