Fitch Assigns Expected Ratings to National RMBS Trust 2015-1
AUD690m Class A notes: 'AAA(EXP)sf'; Outlook Stable;
AUD45m Class B notes: 'A(EXP)sf'; Outlook Stable; and
AUD15m Class C notes: 'NRsf'.
The notes are issued by Perpetual Trustee Company Limited in its capacity as trustee of National RMBS Trust 2015-1.
At the cut-off date, the portfolio contains loans that have been underwritten in accordance with NAB's credit policy guidelines. The weighted-average (WA) seasoning is 25 months, with a WA unindexed loan to value ratio (LVR) of 64.2%, and a WA indexed LVR of 62.7%. The current average loan size is AUD293,511, with investment loans representing 20.2% of the pool by balance, and interest-only loans representing 23.4%.
KEY RATING DRIVERS
The transaction has an initial Class A subordination of 8.0%. Interest is paid sequentially (after expenses) towards the Class A, B and then C notes. The reimbursement of all losses is paid after the distribution of interest on the Class B notes. Principal will be allocated pro rata to the Class A, B and C notes should certain conditions be met.
The Class C notes' interest is ranked at the bottom of the interest waterfall, ensuring that the transaction benefits from an increased amount of excess spread, which is available to cover losses and charge-offs as well as withstand liquidity shocks.
Liquidity support will be provided via excess spread, principal draws and a liquidity facility sized at 1.9% of the notes' balance, with a facility floor of AUD1.425m. The liquidity facility will amortise, subject to the floor, while performance-based triggers are satisfied.
NAB has considerable experience in mortgage lending and servicing. It originates loans through its nationwide branch network, mobile sales force, online and telephone sales operations. The arrears level of securitised National RMBS transactions has historically tracked below Fitch's Dinkum Index for prime RMBS.
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 potentially negative rating actions on the notes. Fitch has evaluated National RMBS Trust 2015-1's expected ratings sensitivity to increased defaults and decreased recovery rates over the life of the transaction. Its analysis found that the Class A notes' ratings remained stable under each of Fitch's mild and severe default and recovery scenarios.
The analysis found the Class B notes' ratings were sensitive to the mild and severe default and recovery scenarios. Under an increased default stress of 30% the Class B rating dropped down to 'A-sf'. Under a reduced recovery rate stress of 15% and 30%, the Class B rating dropped to 'A-sf' and 'BBBsf' respectively. The rating was severely impacted by the combination scenario of 15% and 30% increased defaults and 15% and 30% decrease in recovery rates, with ratings at 'BBB+sf' and 'BB+sf' respectively.
The transaction structure supports lenders' mortgage insurance (LMI) independent ratings for the Class A notes. Therefore LMI is not required to support the rating due to the level of credit support provided by the lower notes.
Key Rating Drivers and Expected Rating Sensitivities are further discussed in the corresponding presale report entitled "National RMBS Trust 2015-1", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.