Fitch Affirms SMHL Series 2008-1 Fund at 'AAAsf'; Outlook Stable
AUD1,981.2m Class A (ISIN AU3FN0007605) notes affirmed at 'AAAsf'; Outlook Stable.
KEY RATING DRIVERS
The affirmation reflects Fitch's view that available credit enhancement is sufficient to support the notes' current ratings, our expectations of Australia's economic conditions, and the fact that the credit quality and performance of the loans in the collateral pool have remained in line with expectations. The transaction remains within its substitution period, with principal collections being used to purchase additional receivables.
The transaction has recorded low levels of defaults and arrears. At 17 September 2015, 30+ days arrears stood at 1.28%, above Fitch's Dinkum Index of 1.12%. There have been five foreclosures since issuance, resulting in a loss of AUD136,413. Lenders' mortgage insurance (LMI) has covered 99.9% of realised losses and losses not covered by LMI were covered by excess spread. The underlying portfolio has 60% LMI coverage, provided by Genworth Financial Mortgage Ltd (Insurer Financial Strength Rating: A+/Stable).
SMHL Series 2008-1 Fund's revolving period ends in February 2019. Fitch is comfortable with the long revolving period because portfolio stratifications have not changed significantly since closing, ME Bank's product mix has not materially changed over this time, and the portfolio is performing as expected.
At Fitch's 'AAAsf' breakeven stressed default rate of 9.8%, the transaction could withstand an additional 0.6% in defaults, the transaction could withstand an additional 0.6% in defaults. The transaction is sensitive to a one notch downgrade to the LMI provider.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by ME Bank compared to ME Bank'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.
A comparison of the transaction's representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports and/or links given under Related Research below.