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Fitch Affirms Ratings of Three AIMS RMBS Transactions

Published 14/01/2016, 05:46 pm
Fitch Affirms Ratings of Three AIMS RMBS Transactions
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(The following statement was released by the rating agency)SYDNEY, January 14 (Fitch) Fitch Ratings has affirmed the ratings of five tranches of three AIMS residential mortgage backed securities (RMBS) transaction. The transactions are securitisations of first-ranking Australian residential mortgages originated by AIMS Home Loans Pty Limited and Loancorp Pty Limited. The full list of rating actions can be found at the end of this commentary.KEY RATING DRIVERSThe affirmations reflect Fitch's view that available credit enhancement is sufficient to support the notes' current ratings, and can withstand deterioration of economic conditions in Australia in line with the agency's expectations. The credit quality and performance of the loans in the collateral pools have also remained in line with expectations. The Class B ratings for all three transactions benefit from lenders' mortgage insurance (LMI) and excess spread. Arrears for the transactions, as a percentage, tend to be volatile due to the relatively small size of the pools, but arrears balances have remained stable over the past 12 months. As at November 2015, all three AIMS transactions had 30+ day arrears, above Fitch's Dinkum Index, which measures industry-wide performance (3Q15: 0.91%). Fitch considers all loans marked in arrears or in hardship, as being in arrears. This resulted in an additional loan in AIMS 2005-1 Trust and AIMS 2007-1 Trust being marked in arrears, compared to the AIMS reporting.There were no defaults recorded in any AIMS transactions over the 12 months ending November 2015. Losses on the underlying mortgages in the pool have been covered primarily by LMI. All loans contained in the collateral pools have LMI in place, with policies being provided by QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength rating: AA-/Stable), and Genworth Financial (N:GNW) Mortgage Insurance Pty Ltd (Insurer Financial Strength rating: A+/Stable). Any losses not covered by LMI have been covered by excess spread.The transactions are well seasoned between 9.6 years and 12.3 years. As a result, Fitch's calculated weighted average indexed loan to value ratios were 36.3%, 44.0% and 47.2 % respectively, compared to 51.6%, 59.9% and 62.2% before indexation. Each pool is geographically concentrated in NSW which Fitch has taken into account in its analysis.RATING SENSITIVITIESSequential pay-down has increased credit enhancement for the senior notes of each transaction, with the 'AAAsf' rated notes able to withstand many multiples of the latest reported arrears. The 'AAAsf'-modelled default rates were 12.8% and 18.9% for AIMS 2005-1 Trust and AIMS 2007-1 Trust, respectively. The Class A notes can withstand 100% in defaults at Fitch's 'AAAsf' loss severity and are LMI independent, meaning they are not sensitive to downgrades of the LMI providers' ratings. This analysis excludes credit to excess spread, which has been strong and stable in each of the transactions.The ratings of all the AIMS RMBS transactions' Class A notes are independent of downgrades to the LMI provider's ratings.Class B notes may be downgraded if there were to be a significant reduction in payment of LMI claims or excess spread. There have been no charge-offs to date on the Class B notes.DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action.DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the underlying pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the underlying pools' information or conducted a review of loan origination files as part of its ongoing monitoring.The rating actions are as follows (as at latest reporting):AIMS 2004-1 Trust:AUD17.2 m Class B (ISIN AU300AIM2043) affirmed at 'Bsf'; Outlook Stable.AIMS 2005-1 Trust:AUD9.7m Class A (ISIN AU300AIM3017) affirmed at 'AAAsf'; Outlook Stable; andAUD12.8m Class B (ISIN AU300AIM3025) affirmed at 'Bsf'; Outlook Stable.AIMS 2007-1 Trust:AUD10.1m Class A (ISIN AU3FN0002663) affirmed at 'AAAsf'; Outlook Stable; andAUD16.3m Class B (ISIN AU3FN0002671) affirmed at 'Bsf'; Outlook Stable.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.Contacts: Lead surveillance analyst Hai Duong LeAssociate Director+61 2 8256 0358Fitch Australia Pty Ltd., Level 15, 77 King St, Sydney, NSW 2000, AustraliaCommittee Chairperson

Alison HoSenior Director+852 2263 9937Media Relations: Leni Vu, Sydney, Tel: +61 2 8256 0304, Email: leni.vu@fitchratings.com.Additional information is available at www.fitchratings.com.Sources of Information:The source of information used to assess these ratings was the servicer, AIMS Home Loans Pty Limited. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.Applicable Criteria APAC Residential Mortgage Criteria (pub. 23 Jun 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867437Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175Global Criteria for Lenders’ Mortgage Insurance in RMBS (pub. 23 Jun 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865195Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952Related Research Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875850Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=997858Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997858Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det ail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.

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