RPT-Fitch Rates Firstmac Mortgage Funding Trust No. 4 Series 1A-2014 'AAAsf'/'F1+sf'

Thu Jun 26, 2014 3:26am EDT

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June 26 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned final ratings and Outlooks to Firstmac Mortgage Funding Trust No. 4 Series 1A-2014's mortgage-backed floating-rate notes. The issuance consists of notes backed by Australian prime residential mortgages originated by Firstmac nominee originators. The ratings are as follows:

AUD340.00m Class A-1 notes: 'AAAsf'; Outlook Stable

USD 270.00m Class A-2A notes: 'F1+sf'

AUD0.00m Class A-2R notes: 'AAAsf'; Outlook Stable

AUD37.50m Class A-3 notes: 'AAAsf'; Outlook Stable

AUD45.75m Class AB notes: NR

AUD22.50m Class B-1 notes: NR

AUD3.75m Class B-2 notes: NR

AUD3.0m Class B-3 notes: NR

The notes, due September 2045, have been issued by Firstmac Fiduciary Services Pty Ltd in its capacity as trustee of Firstmac Mortgage Funding Trust No. 4 Series 1A-2014.

At the cut-off date, 30 April 2014, the total collateral pool consisted of 3,291 loans to 2,537 borrowers totaling approximately AUD744.1m.

KEY RATING DRIVERS

Key Pool Characteristics: The weighted-average (WA) seasoning of the portfolio is 26.5 months with an average current loan/value ratio (LVR) of 67.0% (indexed LVR is 64.4%). The transaction has a proportion of loans that are interest only (44.5%), and investment loans make up 37.9% of the pool by balance. Lenders' mortgage insurance (LMI) is present on 62.0% of the pool, which differs from prior Firstmac RMBS transactions where all loans had LMI present.

Short-Term Note: The transaction includes a US dollar short-term bullet note (class A-2A) that will be refinanced via the issuance of class A-2B short-term notes in either Australian or US dollars. If refinancing is not available for the class A-2A notes or the class A-2B notes, then either class of notes will be refinanced from a combination of funds collected in a deposit account and a redemption facility provided by National Australia Bank Limited (NAB, AA-/Stable/F1+), creating a rating link to NAB.

Excess Spread Trap: The transaction benefits from a spread reserve account funded by excess income that is available to cover both liquidity shortfalls and losses.

Stable Performance to Date: Firstmac's loan book is currently revealing 30+ days arrears of 0.8% as of March 2014. This is below Fitch's current Dinkum Index of 1.2% for prime RMBS arrears. Firstmac's arrears have tracked at or below the Dinkum Index for prime RMBS in recent years.

RATING SENSITIVITY

Unexpected decreases in residential property values, increases in the frequency of foreclosures, and loss severity on defaulted mortgages could produce loss levels higher than Fitch's base case, which could in turn result in potentially negative rating actions on the notes. Fitch has evaluated the sensitivity of the ratings assigned to Firstmac Mortgage Funding Trust No. 4 Series 1A-2014 to increased defaults and decreased recovery rates over the life of the transaction.

The analysis found that the Class A-1, A-2A, A-2R and A-3 notes' ratings remained stable under each of Fitch's medium and severe default and recovery scenarios (15% or 30% increase in defaults and 15% or 30% decrease in recovery rates). In a medium combined stress scenario, ratings also remained stable, while under a severe combined stress scenario, Class A-1 and A-2R notes' ratings were negatively impacted by one notch to 'AA+sf' and Class A-3 notes' ratings were negatively impacted by two notches to AAsf .

Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled "Firstmac Mortgage Funding Trust No. 4 Series 1A-2014", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.

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