Fitch Affirms 15 National RMBS Tranches; Outlook Stable

Fitch Affirms 15 National RMBS Tranches; Outlook Stable

© Reuters.  Fitch Affirms 15 National RMBS Tranches; Outlook Stable

© Reuters. Fitch Affirms 15 National RMBS Tranches; Outlook Stable

(The following statement was released by the rating agency) Fitch Ratings-Sydney-January 16: Fitch Ratings has affirmed 15 tranches from seven National RMBS Trust transactions. The transactions are securitisations of first-ranking Australian residential mortgages. A full list of rating actions follows at the end of this rating action commentary. National RMBS Trust 2011-1, National RMBS Trust 2012-1 and National RMBS Trust 2012-2 were originated by Advantedge Financial Services Pty Limited and Challenger Mortgage Management Pty Limited, while National RMBS Trust 2011-2, National RMBS Trust 2015-1, National RMBS Trust 2015-2 and National RMBS Trust 2018-1 were originated by National Australia Bank Limited (NAB, AA-/Stable/F1+).

KEY RATING DRIVERS Operational Risk: NAB is a major lender headquartered in Melbourne. Fitch undertook an onsite operational review and found that the operations of the originator and servicer were comparable with market standards and that there were no material changes that may affect NAB’s ability to undertake administration and collection activities. NAB’s collection timelines, policies and procedures are in line with those of other conforming lenders in Australia, as evident from the historical performance of NAB’s transactions. Asset Analysis: The asset model was not re-run for the transactions, with the exception of 2015-1, in accordance with Fitch’s criteria, as the notes are rated at the highest possible level, asset composition and performance have not deteriorated materially and there have been no material changes to asset assumptions since the last asset model analysis. Of the transactions for which the asset model was not re-run, three had 30+ day arrears (excluding loans in hardship) above Fitch’s 3Q18 Dinkum RMBS Index of 1.04% as at end-November 2018, with the highest being 1.6% and the lowest 0.7%. We expect arrears as a percentage for longer seasoned transactions to increase due to the small pool size. Arrears by balance remain stable. Performance remains strong, with low loss levels ranging from 0.0% to 0.4% across the trusts. Lenders’ mortgage insurance (LMI) is present in all trusts, with coverage ranging between 13.3% to 27.0% except for 2011-1, which benefits from 61.1% coverage. At the trust level, LMI has covered between 75.5% to 100.0% of all submitted claims. For 2015-1, the ‘AAAsf’ weighted-average (WA) foreclosure frequency of 7.4% was driven by the WA unindexed loan/value ratio (LVR) of 51.3%, interest-only borrowers of 12.6% and, under Fitch’s methodology, investment loans of 31.4%. The ‘AAAsf’ LMI-dependent WA recovery rate of 73.8% was driven by the WA indexed scheduled LVR of 48.8% and ‘AAAsf’ WA market value decline of 57.3%. The transaction’s 30+ day arrears were 1.9%, above Fitch’s 3Q18 Dinkum index due to the diminishing portfolio balance and rise in 90+ day arrears to 1.0%. The transaction has met its subordination conditions and is paying down pro rata; 14.3% of the portfolio benefits from LMI provided by Genworth Financial (NYSE:) Mortgage Insurance Pty Limited (IFS: A+/Stable) and QBE Lenders’ Mortgage Insurance Limited (IFS: AA-/Stable). The initial revolving period of 2012-1 was five years, but this has been extended for a further five years, of which 3.7 years remain. The revolving period of 2015-2 is 10 years, of which 7.3 years remain. Fitch believes the risks associated with the long revolving periods are commensurate with the ratings because NAB has a stable product history and eligibility criteria, including portfolio parameters in 2015-2 that maintain portfolio characteristics during the revolving period. Liability Analysis: Cash flow analysis has not been performed as cash flow distributions have been within Fitch’s expectations and there have been no material changes to cash flow assumptions since the last cash flow analysis. Macroeconomic Factors: Fitch forecasts stable mortgage performance supported by sustained economic growth in Australia, with GDP forecast to increase by 2.8% in 2019. Steady labour markets and low interest rates further support the outlook attributed to the rated notes. RATING SENSITIVITIES Fitch does not expect the ratings to be affected by any foreseeable change in performance. The prospect of a downgrade is remote, given the level of subordination to all rated notes and pool performance to date. Sensitivities from the asset model for 2015-1 are: Rating sensitivity to increased defaults: Notes: A/B Rating: AAAsf/AA+sf Increase in defaults by 15%: AAAsf/AA+sf Increase in defaults by 30%: AAAsf/AA+sf Rating sensitivities to decreased recoveries: Notes: A/B Rating: AAAsf/AA+sf Reduce recoveries by 15%: AAAsf/AA+sf Reduce recoveries by 30%: AAAsf/AA+sf Rating sensitivity to multiple factors: Notes: A/B Rating: AAAsf/AA+sf Increase in defaults, reduce recoveries by 15%: AAAsf/AA+sf Increase in defaults, reduce recoveries by 30%: AAAsf/A+sf The class B notes of 2011-2 and 2015-1 are constrained at their current ratings as they have failed Fitch’s ‘AAAsf’ tail-risk test. The ratings are independent of downgrades in the LMI providers’ ratings, with the exception of the 2015-1 class B note. 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. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and transactions. There were no findings that were material to this analysis. Fitch did not review the results of a third party assessment conducted on the asset portfolio information prior to the closing of the transactions. Prior to 2018-1 closing, Fitch sought to receive a third-party assessment conducted on the asset portfolio information, but none was available for this transaction. As part of its ongoing monitoring, Fitch reviewed a small targeted sample of NAB’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, Fitch’s assessment of the asset-pool information relied upon for the agency’s rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis: Loan-by-loan data provided by NAB as at 30 November 2018. Transaction reporting data provided by NAB as at 30 November 2018. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. The full list of rating actions is shown below: National RMBS Trust 2011-1 AUD61.8 million Class A1 affirmed at ‘AAAsf’; Outlook Stable AUD51.1 million Class A2-R affirmed at ‘AAAsf’; Outlook Stable AUD6.8 million Class B affirmed at ‘AAAsf’; Outlook Stable National RMBS Trust 2011-2 AUD84.7 million Class A1-R affirmed at ‘AAAsf’; Outlook Stable AUD93.4 million Class A2 affirmed at ‘AAAsf’; Outlook Stable AUD21.0 million Class B affirmed at ‘AA+sf’; Outlook Stable National RMBS Trust 2012-1 AUD23,450.6 million Class A affirmed at ‘AAAsf’; Outlook Stable National RMBS Trust 2012-2 AUD104.9 million Class A1 affirmed at ‘AAAsf’; Outlook Stable AUD54.4 million Class A2-R affirmed at ‘AAAsf’; Outlook Stable National RMBS Trust 2015-1 AUD534.0 million Class A affirmed at ‘AAAsf’; Outlook Stable AUD89.3 million Class B affirmed at ‘AA+sf’; Outlook Stable National RMBS Trust 2015-2 AUD8,491.0 million Class A affirmed at ‘AAAsf’; Outlook Stable National RMBS Trust 2018-1 AUD1,193 million Class A1-A affirmed at ‘AAAsf’; Outlook Stable AUD232.4 million Class A1-G affirmed at ‘AAAsf’; Outlook Stable AUD70 million Class A2 affirmed at ‘AAAsf’; Outlook Stable Contacts: Surveillance Analyst Marc Dinkelmann Associate Director +612 8256 0371 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney NSW 2000 Committee Chairperson Natasha Vojvodic Senior Director +612 8256 0350 Media Relations: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com; Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com. Additional information is available on www.fitchratings.com Applicable Criteria APAC Residential Mortgage Rating Criteria (pub. 11 Jan 2019) https://www.fitchratings.com/site/re/10057538 Global Structured Finance Rating Criteria (pub. 15 May 2018) https://www.fitchratings.com/site/re/10029600 RMBS Lenders’ Mortgage Insurance Rating Criteria (pub. 03 Apr 2018) https://www.fitchratings.com/site/re/10025397 Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 01 Aug 2018) https://www.fitchratings.com/site/re/10039504 Structured Finance and Covered Bonds Counterparty Rating Criteria: Derivative Addendum (pub. 01 Aug 2018) https://www.fitchratings.com/site/re/10039505 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/site/dodd-frank-disclosure/10059173 Solicitation Status https://www.fitchratings.com/site/pr/10059173#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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