17.08.2015, 15:03
Fitch Assigns Expected Ratings to PUMA Series 2015-3
OREANDA-NEWS. Fitch Ratings has assigned expected ratings to PUMA Series 2015-3's residential mortgage-backed floating-rate notes. The issuance consists of notes backed by first-ranking Australian residential, full documentation mortgage loans originated by Macquarie Bank Limited (MBL, A/Stable/F1). The ratings are as follows:
AUD460m Class A notes: 'AAA(EXP)sf'; Outlook Stable;
AUD30m Class B1 notes: 'AA(EXP)sf'; Outlook Stable; and
AUD10m Class B2 notes: 'NRsf'.
The notes will be issued by Perpetual Limited in its capacity as trustee of PUMA Series 2015-3.
At the cut-off date, the pool had 100% lenders' mortgage insurance (LMI) cover. The weighted-average (WA) seasoning of the portfolio is 21 months, with a WA indexed loan/value ratio (LVR) of 63.2% and WA unindexed LVR of 65.9%. Loans with an LVR greater than 80% account for 16.9% of the pool, and 23.5% have a current loan balance greater than AUD500,000. The average current loan size is AUD267,231; investment loans represent 24.9% of the pool by balance, and staff loans represent 0.6%.
KEY RATING DRIVERS
Sequential Paydown: Principal is paid sequentially throughout the life of the transaction, and does not switch to a pro rata paydown at any stage. Interest is paid sequentially (after expenses) towards the Class A and B1 notes; the Class B2 note interest is subordinate to other payments.
Optional Redemption: The Class A and B1 notes may be redeemed in full on any payment date on or after the scheduled maturity date, August 2020. Redemption of the notes will be funded through the issuance of refinancing notes to be known as Class A-R and/or Class B1-R. Class B1 cannot be refinanced ahead of the Class A notes.
Sufficient Liquidity Support: Liquidity support will be provided via excess spread, principal draws and a liquidity reserve sized at 1.3% of the mortgage balance, with a facility floor of AUD650,000. The liquidity reserve will amortise, subject to the floor.
Experienced Originator: MBL and its wholly owned servicing entity, MSL, have been involved in the origination, servicing and management of housing loans since 1990. MSL services about 76,000 residential mortgages. Total RMBS issuance to date is about AUD52bn.
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 expected ratings assigned to PUMA Series 2015-3 to increased defaults and decreased recovery rates over the life of the transaction. Its analysis found that the Class A and B1 notes' ratings remained stable under Fitch's medium (15% increase) and severe default (30% increase) scenarios. The Class A notes' ratings also remained stable under the medium (15% decrease) and severe (30% decrease) recovery rate scenarios. However the Class B1 notes' ratings were impacted under the severe (30% decrease) recovery rate scenario, with the rating at 'A-sf'.
The Class A and B1 notes' ratings are not impacted by the rating sensitivity scenarios tested under a combination of both increased defaults and decreased recovery rates at 15% each. However, both were impacted by the combination scenario of 30% increased defaults and 30% decrease in recovery rates, with the rating at 'AA+sf' for the Class A notes and 'BBBsf' for the Class B1 notes under this scenario.
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 MBL compared to MBL's 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 entitled "PUMA Series 2015-3", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.
AUD460m Class A notes: 'AAA(EXP)sf'; Outlook Stable;
AUD30m Class B1 notes: 'AA(EXP)sf'; Outlook Stable; and
AUD10m Class B2 notes: 'NRsf'.
The notes will be issued by Perpetual Limited in its capacity as trustee of PUMA Series 2015-3.
At the cut-off date, the pool had 100% lenders' mortgage insurance (LMI) cover. The weighted-average (WA) seasoning of the portfolio is 21 months, with a WA indexed loan/value ratio (LVR) of 63.2% and WA unindexed LVR of 65.9%. Loans with an LVR greater than 80% account for 16.9% of the pool, and 23.5% have a current loan balance greater than AUD500,000. The average current loan size is AUD267,231; investment loans represent 24.9% of the pool by balance, and staff loans represent 0.6%.
KEY RATING DRIVERS
Sequential Paydown: Principal is paid sequentially throughout the life of the transaction, and does not switch to a pro rata paydown at any stage. Interest is paid sequentially (after expenses) towards the Class A and B1 notes; the Class B2 note interest is subordinate to other payments.
Optional Redemption: The Class A and B1 notes may be redeemed in full on any payment date on or after the scheduled maturity date, August 2020. Redemption of the notes will be funded through the issuance of refinancing notes to be known as Class A-R and/or Class B1-R. Class B1 cannot be refinanced ahead of the Class A notes.
Sufficient Liquidity Support: Liquidity support will be provided via excess spread, principal draws and a liquidity reserve sized at 1.3% of the mortgage balance, with a facility floor of AUD650,000. The liquidity reserve will amortise, subject to the floor.
Experienced Originator: MBL and its wholly owned servicing entity, MSL, have been involved in the origination, servicing and management of housing loans since 1990. MSL services about 76,000 residential mortgages. Total RMBS issuance to date is about AUD52bn.
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 expected ratings assigned to PUMA Series 2015-3 to increased defaults and decreased recovery rates over the life of the transaction. Its analysis found that the Class A and B1 notes' ratings remained stable under Fitch's medium (15% increase) and severe default (30% increase) scenarios. The Class A notes' ratings also remained stable under the medium (15% decrease) and severe (30% decrease) recovery rate scenarios. However the Class B1 notes' ratings were impacted under the severe (30% decrease) recovery rate scenario, with the rating at 'A-sf'.
The Class A and B1 notes' ratings are not impacted by the rating sensitivity scenarios tested under a combination of both increased defaults and decreased recovery rates at 15% each. However, both were impacted by the combination scenario of 30% increased defaults and 30% decrease in recovery rates, with the rating at 'AA+sf' for the Class A notes and 'BBBsf' for the Class B1 notes under this scenario.
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 MBL compared to MBL's 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 entitled "PUMA Series 2015-3", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.
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