OREANDA-NEWS. Fitch Ratings has assigned expected ratings to RESIMAC Bastille Trust - RESIMAC Series 2016-1NC's residential mortgage-backed floating-rate notes. The issuance consists of notes backed by a pool of conforming and non-conforming first-ranking Australian residential loans originated by RESIMAC Limited (RESIMAC). The ratings are as follows:

- AUD70.0m Class A1a notes: 'AAA(EXP)sf'; Outlook Stable

- AUD175.0m Class A1b notes: 'AAA(EXP)sf'; Outlook Stable

- AUD42.0m Class A2 notes: 'AAA(EXP)sf'; Outlook Stable

- AUD36.7m Class B notes: 'NR(EXP)sf'

- AUD5.3m Class C notes: 'NR(EXP)sf'

- AUD7.0m Class D notes: 'NR(EXP)sf'

- AUD3.5m Class E notes: 'NR(EXP)sf'

- AUD7.0m Class F notes: 'NR(EXP)sf'

- AUD3.5m Class G notes: 'NR(EXP)sf'

The notes will be issued by Perpetual Trustee Company Limited in its capacity as trustee of RESIMAC Bastille Trust - RESIMAC Series 2016-1NC.

KEY RATING DRIVERS

Sufficient Credit Support: The class A1a and A1b notes benefit from credit enhancement of 30%, provided by the subordinate class A2, B, C, D, E, F and G notes; from the liquidity facility; and RESIMAC's servicing and underwriting capabilities. The class A2 notes benefit from credit enhancement of 18%.

Significant Low-Doc Composition: Low-documentation loans and specialist lending comprise a major proportion of the portfolio. The mortgage pool's weighted-average (WA) seasoning is 24.6 months, the WA loan-to-value ratio is 70.3%, and the WA indexed loan-to-value ratio is 68.0%. Credit-impaired loans comprise 20.0% of the portfolio and interest-only loans 45%.

Strong Excess Spread: The transaction benefits from a strong flow of excess income, which is available to cover losses. RESIMAC's non-conforming borrowers pay significantly higher interest rates than borrowers of conforming loans.

Structure Supports Higher-Ranking Notes: The retention mechanism supports faster paydown of lower-ranking notes before the call date by allocating a part of excess spread to the outstanding principal, progressively reducing the WA margin. Additional class G notes will be substituted to the retention amount, so credit enhancement to higher-ranking notes is not diminished.

Experienced Originator/Servicer: RESIMAC is an experienced specialty mortgage lender, having begun its non-conforming originations in 2007.

EXPECTED RATING SENSITIVITIES

Unexpected decreases in residential property value, increases in the frequency of foreclosures, and loss severity on defaulted mortgages could produce loss levels higher than Fitch's base case, which could result in negative rating actions on the notes.

Fitch evaluated the sensitivity of the ratings assigned to RESIMAC Bastille Trust - RESIMAC Series 2016-1NC to increased defaults and decreased recovery rates over the life of the transaction.

Its analysis found that the rating on the class A1a notes was not impacted in any of Fitch's sensitivity scenarios.

The ratings deteriorated to 'AA+sf' under Fitch's moderate (15% increase) default scenario. The ratings on the notes deteriorated further to 'AAsf' under the severe (30% increase) default scenario.

The class A1b and A2 notes were not impacted under Fitch's moderate (15% decrease) recovery scenarios. The ratings deteriorated to 'AAsf' under the severe (30% decrease) scenario.

Under Fitch's moderate combination stress of 15% increase in defaults and 15% decrease in recoveries, the class A1b and class A2 notes' ratings deteriorated to 'AAsf'. The ratings on the notes deteriorated further to 'A+sf' in the severe combination stress of 30% increase in defaults and 30% decrease in recoveries.

The ratings on the class A1a, A1b, and A2 notes are independent of the ratings on the providers of lenders' mortgage insurance (LMI) due to the transaction structure. Therefore LMI is not required to support the rating due to the level of credit support provided by the lower notes.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by RESIMAC compared to its credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.

Key Rating Drivers and Expected Rating Sensitivities are further discussed in the corresponding presale report titled "RESIMAC Bastille Trust - RESIMAC Series 2016-1NC", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.