SMHL Securitisation Fund 2012-2 Class A2-R Bonds Assigned Four Classes Affirmed

Stocks and Financial Services Press Releases Wednesday September 13, 2017 17:17
MELBOURNE--13 Sep--S&P Global Ratings

MELBOURNE (S&P Global Ratings) Sept. 13, 2017--S&P Global Ratings today assigned its 'AAA (sf)' rating to the class A2-R residential mortgage-backed securities (RMBS) issued by Perpetual Ltd. as trustee for SMHL Securitisation Fund 2012-2.

At the same time, we affirmed our ratings on four classes of bonds and withdrew our rating on the A2 bonds (see list). The issuance of the class A2-R bonds have been applied to redeem the class A2 bonds on their scheduled maturity date.

The class A2-R bonds are floating-rate, pass-through notes with a legal final maturity of July 9, 2043. In addition to the issuance of the A2-R bonds, documented changes were made that extend the use of the excess revenue reserve to include any withholding tax payable on the A2-R bonds.

At the same time, the maximum excess revenue reserve amount has increased to 0.375% of the initial invested amount of all bonds from 0.3%. We have incorporated these changes into our cash-flow analysis.

The rating actions reflect: Our view of the credit risk of the underlying collateral portfolio, which has a weighted-average current loan-to-value ratio of 42.7% and weighted-average loan seasoning of 139.5 months.

Transaction performance has been within expectations since transaction close. A total of 1.0% of the loans in the pool are in arrears as of Aug. 28, 2017, of which 0.7% are more than 90 days in arrears.

Our view that the support provided by lenders' mortgage insurance (LMI) policies covering 100% of the pool of mortgages and the subordination provided are sufficient to withstand the stresses commensurate with the rating.

The LMI policies on the insured loans cover 100% of the outstanding principal of the loans insured, including accrued interest during the recovery period and reasonable realization costs.For the class A bonds, the subordination of the class AB bonds and the class B bonds. For the class AB bonds, the subordination of the class B bonds.

Excess spread, if any, will be used to offset losses in priority to distribution to the beneficiary, through an excess spread reserve.

Our expectation that the liquidity reserve, equal to 0.9% of the bonds outstanding within the transaction, is adequate under our stress assumptions to ensure timely payment of interest.Members Equity Bank Ltd.'s underwriting standards, processes, and servicing quality, which are consistent with industry-wide practices.

The pool is made up entirely of full-documentation loans for which the income of the borrower has been fully verified.

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