Fitch Assigns Expected Ratings to RESIMAC Triomphe Trust - RESIMAC Premier Series 2016-1
OREANDA-NEWS. Fitch Ratings has assigned expected ratings to RESIMAC Triomphe Trust - RESIMAC Premier Series 2016-1's mortgage-backed floating-rate notes. The issuance consists of notes backed by first-ranking Australian residential mortgages originated by RESIMAC Limited. The expected ratings are as follows:
- USD200.0m Class A1 notes: 'AAA(EXP)sf'; Outlook Stable
- AUD164.3m Class A2 notes: 'AAA(EXP)sf'; Outlook Stable
- AUD21.5m Class AB notes: 'AAA(EXP)sf'; Outlook Stable
- AUD14.5m Class B notes: 'NR(EXP)sf'
- AUD6.0m Class C notes: 'NR(EXP)sf'
- AUD5.0m Class D notes: 'NR(EXP)sf'
- AUD3.0m Class E notes: 'NR(EXP)sf'.
The notes will be issued by Perpetual Trustee Company Limited in its capacity as trustee of RESIMAC Triomphe Trust - RESIMAC Premier Series 2016-1.
KEY RATING DRIVERS
Sufficient Enhancement: The 'AAAsf' Long-Term Rating with Stable Outlook assigned to the class A1, A2 and AB notes are based on the quality of the collateral; 10% credit enhancement to the class A1 and A2 notes by the subordinate AB, B, C, D and E notes; and 5.7% credit enhancement to the class AB notes by the subordinate B, C, D and E notes.
Pool Characteristics: The credit quality of the collateral backing the 2016-1 transaction differs from prior pools securitised under the RESIMAC programme. The pool has increased investment and interest-only loans and is the first RESIMAC pool without 100% lenders' mortgage insurance (LMI) cover. The pool has 34.3% LMI cover. The weighted-average seasoning of the portfolio is 16 months; with a weighted-average indexed loan-to-value ratio of 67.6% and weighted-average unindexed loan-to-value ratio of 68.5%. The average current obligor size is AUD395,894. Interest-only loans represent 55.6% of the pool by balance and investment loans represent 55.3%.
Class A1 Scheduled Amortisation: Class A1 notes will pay fixed principal amounts according to a quarterly principal schedule prior to the class A1 scheduled amortisation maturity date, being the earlier of April 2019 or the 20% call option. The notes are denominated in US dollars. Following the scheduled amortisation maturity date, class A1 converts to a pass-through bond.
Amortisation Facility Supports Schedule: The transaction features a scheduled amortisation facility to support repayments of class A1 scheduled amortisation amounts. The facility will be provided by National Australia Bank Limited (NAB, AA-/Stable/F1+), and is sized assuming a constant prepayment rate of 0% in the first six months and 10% thereafter.
EXPECTED RATING SENSITIVITIES
Unexpected decreases in residential property values, increased foreclosures and loss severity on defaulted mortgages could produce higher losses than Fitch's base case. This could result in negative rating action on the notes.
Fitch has evaluated the sensitivity of the ratings assigned to RESIMAC Triomphe Trust - RESIMAC Premier Series 2016- to increased defaults and decreased recovery rates over the life of the transaction. Its analysis found the Class A1 and A2 notes' rating remained stable under Fitch's severe default (30% increase) and severe recovery (30% decrease) scenarios as well as combined medium default and recovery scenario (15% increase in defaults and 15% decrease in recovery rates). However, the Class A notes' rating was impacted under the combined severe scenario (30% decrease in recovery rates and 30% increase in defaults), with a two-notch rating deterioration to 'AAsf'.
The rating on the Class AB notes would deteriorate to 'AA+sf' in each of the medium scenarios. Under the severe default and severe recovery scenarios, the rating on the Class AB notes is 'AAsf'. Under the combined medium scenario, the Class AB notes' rating would decline to 'AAsf'. Under the combined severe scenario, the rating declined to 'A+sf'.
The transaction structure supports an LMI independent rating for the Class A1 and A2 notes, while the Class AB notes are LMI dependent.
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 RESIMAC compared to their credit policy at the time of underwriting. Fitch 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 "RESIMAC Triomphe Trust - RESIMAC Premier Series 2016-1", published today. Included as an appendix to the report are a description of the representations, warranties and enforcement mechanisms