(The following statement was released by the rating agency)Link to Fitch Ratings' Report: RESIMAC Bastille Trust – RESIMAC Series 2016-1NChttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=886294SYDNEY, August 11 (Fitch)
Fitch Ratings has assigned final ratings to RESIMAC Bastille Trust - RESIMAC Series 2016-1NC's residential mortgage-backed floating-rate notes. The issuance consists of notes backed by a pool or conforming and non-conforming first-ranking Australian residential loans originated by RESIMAC Limited (RESIMAC). The ratings are as follows:- AUD150.0m Class A1a notes: 'AAAsf'; Outlook Stable- AUD375.0m Class A1b notes: 'AAAsf'; Outlook Stable- AUD90.0m Class A2 notes: 'AAAsf'; Outlook Stable- AUD78.8m Class B notes: 'NRsf'- AUD11.3m Class C notes: 'NRsf'- AUD15.0m Class D notes: 'NRsf'- AUD7.5m Class E notes: 'NRsf'- AUD15.0m Class F notes: 'NRsf'- AUD7.5m Class G notes: 'NRsf'
The notes have been issued by Perpetual Trustee Company Limited in its capacity as trustee of RESIMAC Bastille Trust - RESIMAC Series 2016-1NC. The collateral pool consisted of AUD750m of Australian residential mortgage loans, with non-conforming loans making up 57.3% of the portfolio, at the cut-off date. The mortgage pool's weighted-average (WA) seasoning is 22.7 months, WA loan/value ratio is 70.1% and the WA indexed loan/value ratio is 68.1%.
KEY RATING DRIVERS
Sufficient Credit Support: The class A1a and A1b notes benefit from credit enhancement of 30%, provided by the subordinate class A2, B, C, D, E, F and G notes; from the liquidity facility; and RESIMAC's servicing and underwriting capabilities. The class A2 notes benefit from credit enhancement of 18%. Significant Low-Doc Composition: Low-documentation loans and specialist lending comprise a major proportion of the portfolio. Credit-impaired loans comprise 20.6% of the portfolio and interest-only loans 42.2%.Strong Excess Spread: The transaction benefits from a strong flow of excess income, which is available to cover losses. RESIMAC's non-conforming borrowers pay significantly higher interest rates than borrowers of conforming loans.Structure Supports Higher-Ranking Notes: The retention mechanism supports faster paydown of lower-ranking notes before the call date by allocating a part of excess spread to the outstanding principal, progressively reducing the WA margin. Additional class G notes will be substituted to the retention amount so credit enhancement to higher-ranking notes is not diminished. Experienced Originator/Servicer: RESIMAC is an experienced specialty mortgage lender, having begun its non-conforming originations in 2007.
RATING SENSITIVITIES
Unexpected decreases in residential property value, increases in the frequency of foreclosures and loss severity on defaulted mortgages could produce loss levels higher than Fitch's base case. This could result in negative rating actions on the notes.Fitch evaluated the sensitivity of the ratings assigned to RESIMAC Bastille Trust - RESIMAC Series 2016-1NC to increased defaults and decreased recovery rates over the life of the transaction. Its analysis found the rating on the class A1a notes was not affected in any of Fitch's sensitivity scenarios. The ratings deteriorated to 'AA+sf' under Fitch's moderate (15% increase) default scenario. The ratings on the notes deteriorated further to 'AAsf' under the severe (30% increase) default scenario. The class A1b and A2 notes' rating deteriorated to 'AA+sf' under Fitch's moderate (15% decrease) reduced recovery scenarios. The ratings further deteriorated to 'AAsf' under the severe (30% decrease) recovery scenario. Under Fitch's moderate combination stress of 15% increase in defaults and 15% decrease in recoveries, the class A1b and class A2 notes' ratings deteriorated to 'AAsf'. The ratings on the notes deteriorated further to 'A+sf' in the severe combination stress of 30% increase in defaults and 30% decrease in recoveries.The ratings on the class A1a, A1b and A2 notes are independent of the ratings on the providers of lenders' mortgage insurance (LMI) due to the transaction structure. Therefore, LMI is not required to support the rating due to the level of credit support provided by the lower notes.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMSA description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) disclosed in the offering document that relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class, as detailed in Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions /a , dated 31 May 2016.DATA ADEQUACYFitch conducted a review of 10 sample loan files, focusing on the underwriting procedures conducted by RESIMAC compared to RESIMAC's credit policy at the time of underwriting. Fitch checked the consistency and plausibility of the information and no material discrepancies were noted that would affect Fitch's rating analysis. Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled "RESIMAC Bastille Trust - RESIMAC Series 2016-1NC", published today. Included as an appendix to the report is a description of the representations, warranties and enforcement mechanisms.Contacts: Primary Analyst Brenden AsplinAssociate DirectorPhone +612 8256 0340Fitch Australia Pty LtdLevel 15, 77 King St, Sydney NSW 2000Secondary Analyst James LeungDirectorPhone +612 8256 0322Committee Chairperson Natasha VojvodicSenior DirectorPhone +612 8256 0350Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.Additional information is available at www.fitchratings.comThe source of information identified for this rating action was RESIMAC Limited, as arranger, and the issuer's counsel, Clayton Utz. 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. 28 Jul 2016)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884215Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963Global Criteria for Lenders’ Mortgage Insurance in RMBS (pub. 28 Jul 2016)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884107Global Structured Finance Rating Criteria (pub. 27 Jun 2016)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130Related Research RESIMAC Bastille Trust – RESIMAC Series 2016-1NC - Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=886286Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=1010229Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010229Endorsement 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.