Ratings Raised On 35 Tranches Of 2016-Vintage Australian 33 Affirmed

Stocks and Financial Services Press Releases Wednesday June 6, 2018 10:14
MELBOURNE--6 Jun--S&P Global Ratings

MELBOURNE (S&P Global Ratings) June 6, 2018--S&P Global Ratings today raised its ratings on 35 tranches of Australian residential mortgage-backed securitization (RMBS) transactions sponsored by five Australian originators. At the same time, we affirmed our ratings on 33 tranches (see list).

The rating actions follow our periodic review of 15 2016-vintage securitization transactions sponsored by a range of issuers. The diverse range of issuers fall into several categories, including major banks, other banks, nonbanks, and regional banks. We have excluded transactions in this group that are warehouse-style facilities and those that have recently undergone a review.

The rating actions reflect:
  • The credit support provided through note subordination or excess spread is sufficient to cover expected losses at their respective rating levels and withstand various cash-flow stresses, including interest-rate rises. Each of the transactions reviewed benefits from subordination provided by an unrated note.
  • The stable portfolio collateral quality for the group of transactions. The weighted-average loan-to-value ratio across these transactions is around 60.9% and weighted-average seasoning levels are about 4.4 years. This demonstrates an established repayment history for the majority of borrowers.
  • The steady collateral performance, as evidenced by low levels of arrears and losses. For this group of transactions, 0.53% of loans is more than 30 days in arrears compared with 1.16% for Australian prime RMBS as of Feb. 28, 2018,according to the Standard & Poor's Performance Index (SPIN). The SPIN is a weighted-average performance index of all Australian RMBS transactions rated by S&P Global Ratings that are more than 30 days in arrears.
  • The diverse collateral characteristics specific to each transaction. The average exposure to investor loans is 30%, with the lowest being 5.9% and the highest 50.1% of the pool. Interest-only loans make up about 26.8% of loans across the pools, with the lowest having no exposure and the highest having an exposure of around 58.4%.
  • Our cash-flow analysis considers variables that could affect cash flow, the portfolio performance of the transaction, and outlook, as well as the current and potential future payment mechanisms. Our cash-flow analysis demonstrates the timely payment of interest and ultimate payment of principal for the rated notes at their respective rating levels after the application of the appropriate rating stresses outlined in the criteria.
  • Our analytical review considers the credit quality and cash-flow mechanics of each transaction taken from collateral data as of February 2018. All originators in this review have been categorized as 'CA1,' in line with our "Methodology For Assessing Mortgage Insurance And Similar Guarantees And Supports In Structured And Public Sector Finance And Covered Bonds" criteria, published on Dec. 7, 2014.
  • Of the 15 transactions, 14 benefit from lenders' mortgage insurance (LMI). LMI covers an average of 40.6% of all loans for the transactions analyzed, with the remainder being uninsured. Our analysis has given credit to the presence of LMI in the pools.
We will continue to monitor quantitative and qualitative variables as part of our surveillance and future rating review.

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