The U.K. non-conforming market continues to show strong performance, despite looming doubts that tougher market conditions could negatively impact the resiliency of this structure. However, the credit protection in these structures - delivered through borrower equity, excess spread reserve funds and subordination - means that U.K. RMBS is sufficiently enhanced at all rating levels, ensuring that all noteholders should continue to be paid on time and in full in even the most adverse credit environment.

According to Morgan Stanley, over the past three years the market has generated over $4 billion in issues. So far the transactions continue to record low loss levels, and fast prepayments have caused a number of upgrades of the mezzanine and subordinated notes - even with the twin threat of a deteriorating housing market and growing unemployment rates

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