Fitch Affirms Illawarra Series IS Trust; Outlook Stable
OREANDA-NEWS. Fitch Ratings has affirmed Illawarra Series IS Trust's Class A notes at 'AAAsf'. The transaction is a securitisation of Australian conforming residential mortgages originated by IMB Limited (IMB). The rating action is as follows:
AUD441m Class A 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 rating, our expectations of Australia's economic conditions, and 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 used to purchase additional receivables.
The transaction has recorded low levels of arrears and no defaults to date. At 30 September 2015, 30+ days arrears were at 0.22%, below the latest Dinkum RMBS Index level of 1.12% at 2Q15.
The pool benefits from lenders' mortgage insurance (LMI), with policies provided by Genworth Financial Mortgages Insurance Pty Limited (43.6%, Insurer Financial Strength Rating: A+/Stable) and QBE Lenders' Mortgage Insurance Limited (12.9%, Insurer Financial Strength Rating: AA-/Stable).
Fitch's 'AAAsf' breakeven stressed default rate is 16.8%. The Class A notes can withstand an additional 19.2% in defaults at Fitch's 'AAAsf' loss severity.
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 IMB 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.
Illawarra Series IS Trust features a 10-year substitution period, ending in April 2024. Fitch is comfortable with the long revolving period due to the presence of various eligibility criteria and pool parameters, and the portfolio's performance to date.
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 under Related Research below.