SMHL Series Private Placement Trust 2011-1 RMBS Class A Notes Rating Affirmed After Additional Note Issuance

Stocks and Financial Services Press Releases Tuesday April 17, 2018 12:14
MELBOURNE--17 Apr--S&P Global Ratings

MELBOURNE (S&P Global Ratings) April 17, 2018--S&P Global Ratings today affirmed its 'AAA (sf)' rating on the class A residential mortgage-backed securities (RMBS) issued by Perpetual Ltd. as trustee for SMHL Series Private Placement Trust 2011-1.

The rating affirmation follows the issuance of A$100.0 million in class A notes, increasing the aggregate amount of notes to A$658 million. The availability period was also extended to Dec. 31, 2018.
The affirmation reflects:
  • The note subordination provided for the class A notes, which is in excess of the minimum amount we assess as commensurate with the rating level. Credit support provided is thereby sufficient to withstand the stresses commensurate with the rating.
  • Our view of the credit risk of the underlying collateral portfolio. The portfolio has a weighted-average current loan-to-value ratio of 60.5% and weighted-average loan seasoning of about six years.
  • Our view that interest-only loans can create a payment shock when the payments revert to fully amortizing during the remaining term of the loan, leading to a higher risk of default. The portfolio consists of 14.4% interest-only loans, converting to fully amortizing after the interest-only period.
  • Our view that loans for the purpose of investment have a higher risk of default compared with owner-occupier loans. Some 29.8% of the loans in the portfolio are to investors.
  • The support provided by lenders' mortgage insurance (LMI) policies covering 35.11% of the pool of mortgages. 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.
  • The loan composition of the pool, which is made up entirely of full-documentation loans in which the income of the borrower has been fully verified.
  • Our expectation that the liquidity reserve, equal to 1.49% of the bonds outstanding within the transaction, is adequate under our stress assumptions to cover timely payment of interest.
  • The benefit of a fixed rate swap provided by Commonwealth Bank of Australia to hedge fixed-rate loans in the mortgage pool. The pool currently comprises 37.0% fixed-rate loans.
Class Rating
A AAA (sf)

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