Fitch Ratings has assigned final ratings to
The issuance consists of notes backed by a pool of first-ranking Australian residential full-documentation mortgage loans originated by
RATING ACTIONSENTITY/DEBT RATING PRIOR
A1 USQ8068TAA80
LT AAAsf New RatingAAA (EXP)sf
A2 AU3FN0058459
LT AAAsf New RatingAAA (EXP)sf
A3 AU3FN0058616
LT AAAsf New RatingAAA (EXP)sf
AB AU3FN0058467
LT NRsf New Rating NR(EXP)sf
B AU3FN0058475
LT NRsf New Rating NR(EXP)sf
C AU3FN0058483
LT NRsf New Rating NR(EXP)sf
D AU3FN0058491
LT NRsf New Rating NR(EXP)sf
E AU3FN0058509
LT NRsf New Rating NR(EXP)sf
F AU3FN0058517
LT NRsf New Rating NR(EXP)sf
G AU3FN0058525
LT NRsf New Rating NR(EXP)sf
VIEW ADDITIONAL RATING DETAILS
TRANSACTION SUMMARY
The total collateral pool consisted of 3,266 obligors, with loans totalling AUD1.5 billion, at the
KEY RATING DRIVERS
Sufficient Credit Enhancement Mitigates Expected Coronavirus Impact: Fitch has updated criteria assumptions for
The 'AAAsf' WAFF of 11.4%, from 10.1% in
The 'AAAsf' lenders' mortgage insurance (LMI) dependent weighted-average recovery rate (WARR) of 57.5% is driven by the portfolio's WA indexed scheduled LVR of 72.5%, 19.5% of the pool benefiting from LMI and the portfolio 'AAAsf' WA market value decline (WAMVD) of 58.7%. The class A1, A2 and A3 notes benefit from credit enhancement of 10%. The US dollar denominated class A1 note is hedged by the currency-swap provider.
See the following links for Fitch's pandemic-related credit views and analytical approach:
'Global Economic Outlook:
'Fitch Ratings Coronavirus Scenarios: Baseline and Downside Cases - Update', published on
'Global SF Rating Assumptions Updated to Reflect Coronavirus Risk', published on
In addition, analytical notes relevant for Australian and New Zealand RMBS transactions are discussed in the commentary:
'Fitch Ratings' Approach to Addressing Coronavirus-Related Risks for Australian, NZ RMBS', published on
'Fitch Ratings Updates Australia, NZ RMBS Criteria Assumptions on Coronavirus Effects', published on
Limited Liquidity Risk from Payment Holidays: There were no borrowers in the pool on payment deferrals as of the cut-off date. However, we reviewed the transaction's ability to survive a significant proportion of borrowers taking a payment holiday. The transaction can withstand 56% of the portfolio being granted payment holidays before needing to draw on principal or the liquidity facility. The transaction benefits from a liquidity facility sized at 0.75% of the invested note balance and floored at the lesser of AUD1,125,000 and the performing loan balance prior to the call date and AUD1,125,000 post-call.
Low Operational and Servicing Risk:
Economic Rebound in Medium Term Supports Outlook: Fitch expects near-term mortgage performance to deteriorate, but to continue to support the Stable Outlook on the notes. We forecast
RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case and are likely to result in a decline in credit enhancement and remaining loss-coverage levels available to the notes. Decreased credit enhancement may make certain note ratings susceptible to negative rating action, depending on the extent of the coverage decline. Hence, Fitch conducts sensitivity analysis by stressing a transaction's initial base-case assumptions.
This section provides insight into the model-implied sensitivities the transaction faces when assumptions - WAFF or WARR - are modified, while holding others equal. The modelling process uses the modification of default and loss assumptions to reflect asset performance in up and down environments. The results below should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. Fitch modifies the recovery rate to isolate the effect of a change in recovery proceeds at the borrower level.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The rated notes are at 'AAAsf', which is the highest level on Fitch's scale. The ratings cannot be upgraded.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A longer pandemic than Fitch expects that leads to deterioration in macroeconomic fundamentals and consumers' financial positions in
Fitch conducted sensitivity analysis by increasing gross default levels and decreasing recovery rates over the life of the transaction.
Downgrade Sensitivity:
Notes: A1 / A2 / A3
Rating: AAAsf / AAAsf / AAAsf
Increase defaults by 15%: AAAsf / AAAsf / AAAsf
Increase defaults by 30%: AAAsf / AAAsf / AAAsf
Reduce recoveries by 15%: AAAsf / AAAsf / AAAsf
Reduce recoveries by 30%: AAAsf / AAAsf / AAAsf
Increase defaults by 15% and reduce recoveries by 15%: AAAsf / AAAsf / AAAsf
Increase defaults by 30% and reduce recoveries by 30%: AAAsf / AA+sf / AA+sf
The transaction structure supports LMI-independent ratings for the class A1, A2 and A3 notes. LMI is not required to support the ratings due to the level of credit support provided by the lower notes.
Coronavirus Downside Scenario Sensitivity:
Under Fitch's downside scenario, re-emergence of infections in major economies prolongs the health crisis and confidence shock, prompts extensions or renewals of lockdown measures and prevents a financial-market recovery. Fitch tested this scenario by increasing defaults by 15% and decreasing recoveries by 15%.
Notes: A1 / A2 / A3
Rating: AAAsf / AAAsf / AAAsf
Impact on note ratings of downside scenario: AAAsf / AAAsf / AAAsf
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E ('Form 15E') as prepared by
DATA ADEQUACY
Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information, and concluded that there were no findings that affected the rating analysis. Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
DATE OF RELEVANT COMMITTEE
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
Additional information is available on www.fitchratings.com
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