(Repeat for additional subscribers)
May 21 (The following statement was released by the rating agency)
Fitch Ratings has affirmed 20 classes of notes from ten transactions from the PUMA Series of Australian residential mortgage-backed securities (RMBS). Fitch also revised Rating Outlooks on three classes to Positive from Stable. The transactions are backed by pools of Australian conforming residential mortgages originated by managers and brokers under the PUMA securitisation programme. The rating actions are listed at the end of this commentary.
KEY RATING DRIVERS
The affirmations reflect Fitch's view that available credit enhancement supports the notes at their current ratings, the agency's expectations of Australia's economic conditions, and that the credit quality and performance of the loans in the collateral pools remain in line with the agency's expectations. The Outlook Revisions on the junior notes reflect that credit enhancement is expected to build to levels that could trigger positive rating actions on the notes in future if performance remains within expectations.
The underlying pools of PUMA P-15, PUMA P-16, PUMA P-17, PUMA S-13, PUMA 2013-1 and PUMA 2014-1 consist of 100% full documentation mortgages. The underlying pools of PUMA S-6 and PUMA S-7 consist of more than 90% of loans to self-certified or stated income borrowers, while the proportion in PUMA S-9 and PUMA S-10 is around 46%.
Of the pools backed by full-documentation loans, 30+ day arrears were highest in PUMA P-16 (0.8% as at 31 March 2014), below Fitch's 4Q13 Dinkum Index of 1.21%. The transactions which include low-doc/no-doc loans had 30+ day arrears levels ranging from 1.6% (PUMA S 10) to 8.7% (PUMA S-7), compared to Fitch's Low-doc RMBS Index of 5.7%.
All loans in the underlying portfolios have lenders' mortgage insurance (LMI) in place, provided mainly by QBE Lenders Mortgage Insurance Ltd (Insurer Financial Strength Rating: 'AA-'/Stable) and Genworth Financial Mortgage Insurance Pty Ltd. Losses have remained within expectations, with all losses submitted to LMI. At end-March 2014, PUMA S-7 had the greatest dollar amount of submitted claims, totalling AUD4.6m, with 91.9% of claims paid by LMI. Excluding PUMA S-7, the weighted average pay-out ratio across the transactions was 99%. All claims reductions to date have been paid by excess spread.
The Fitch-calculated weighted average (WA) current LVR ranged from 55.2% (PUMA S-6) to 70% (PUMA S-13). PUMA P-16 benefitted the most from indexation with WA LVR improving to 50% from 59%. The least seasoned pools, PUMA 2013-1 (30 months) and PUMA 2014 1 (23 months) had the highest WA indexed LVRs, at 64% and 65% respectively. The WA seasoning across the remaining pools is at least seven years.
Principal is being allocated on a pro-rata basis in PUMA S-10 and PUMA S-13 according to the outstanding balance of the Class A, AB and B notes. As long as the Class B1 notes are outstanding, it will receive the Class B2 notes' share of principal collections. After the Class B1 note is paid in full, the Class AB notes will receive Class B2's share of principal collections. The principal repayment method would switch to sequential when either the collateral balance reaches 10% of the original balance or the trust has sustained a loss which will not be mitigated in a timely manner. This principal allocation mechanism has resulted in increasing credit enhancement to the Class AB notes of each transaction and is likely to see the respective notes' principal fully repaid prior to full repayment of the senior notes.
A significant and unexpected increase in delinquencies, defaults and losses would be necessary before any negative rating action would be considered. Credit enhancement levels for the Class A notes across the transactions can support many multiples of the arrears levels reported in the latest investor reports. Credit enhancement to the 'A+sf' rated Class B notes of PUMA P-16 has increased since issuance due to the presence of a non-amortising first loss reserve. Credit enhancement is expected to continue to build as the transaction reduces in size and may reach a level where an upgrade is considered appropriate, if assets continue to perform as expected.
Credit enhancement to the Class B1 notes of PUMA S-10 and PUMA S-13 (each rated A+sf) has been increasing since issuance due to receiving the Class B2 notes' share of principal allocations, while Class A and Class AB's credit enhancement has remained stable. The expected continued build-up of credit enhancement may eventually result in consideration of positive rating actions on the Class B1 notes, if assets continue to perform as expected.
The ratings of most transactions' notes are independent of downgrades to the LMI provider's ratings; the exceptions are Class B1 notes of PUMA S-10; Class AB and B1 notes of PUMA S-13; and Class B notes of PUMA P-16.
Fitch's initial key rating drivers and rating sensitivities are further discussed in the corresponding New Issue reports listed under "Related Research".
A comparison of the transactions' representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is also available by accessing the reports and/or links given under Related Research below.
Individual representations, warranties, and enforcement mechanisms reports are available for all structured finance transactions initially rated on or after 26 September 2011 at www.fitchratings.com.
The rating actions are as listed below.
PUMA Masterfund P-15 (PUMA P-15):
AUD63.4m Class A (ISIN AU3FN0006144) notes affirmed at 'AAAsf'; Outlook Stable.
PUMA Masterfund P-16 (PUMA P-16):
AUD8.4m Class A2 (ISIN AU3FN0011490) notes affirmed at 'AAAsf'; Outlook Stable;
AUD247.5m Class A3 (ISIN AU3FN0011508) notes affirmed at 'AAAsf'; Outlook Stable;
AUD32.4m Class AB (ISIN AU0000PUBHA0) notes affirmed at 'AAAsf'; Outlook Stable;
AUD13.6m Class B (ISIN AU3FN0011516) notes affirmed at 'A+sf'; Outlook revised to Positive from Stable.
PUMA Masterfund P-17 (PUMA P-17):
AUD172.4m Class A1 (ISIN AU3FN0013017) notes affirmed at 'AAAsf'; Outlook Stable;
AUD122.9m Class A2 (ISIN AU3FN0013025) notes affirmed at 'AAAsf'; Outlook Stable;
AUD35.1m Class AB (ISIN AU3FN0013033) notes affirmed at 'AAAsf'; Outlook Stable.
PUMA Masterfund S-6 (PUMA S-6):
AUD49.1m Class A (ISIN AU0000PUDHA6) notes affirmed at 'AAAsf'; Outlook Stable.
PUMA Masterfund S-7 (PUMA S-7):
AUD82.8m Class A (ISIN AU3FN0006250) notes affirmed at 'AAAsf'; Outlook Stable.
PUMA Masterfund S-9 (PUMA S-9):
AUD171.4m Class A (ISIN AU3FN0012761) notes affirmed at 'AAAsf'; Outlook Stable;
AUD21.3m Class AB (ISIN AU3FN0012779) notes affirmed at 'AAAsf'; Outlook Stable.
PUMA Masterfund S-10 (PUMA S-10):
AUD82.7m Class A (ISIN AU3FN0014767) notes affirmed at 'AAAsf'; Outlook Stable;
AUD15.8m Class AB (ISIN AU3FN0014791) notes affirmed at 'AAAsf'; Outlook Stable;
AUD2.3m Class B1 (ISIN AU3FN0014809) notes affirmed at 'A+sf'; Outlook revised to Positive from Stable.
PUMA Masterfund S-13 (PUMA S-13):
AUD157.1m Class A (ISIN AU3FN0017901) notes affirmed at 'AAAsf'; Outlook Stable; AUD29.4m Class AB (ISIN AU3FN0017919) notes affirmed at 'AAAsf'; Outlook Stable;
AUD5.5m Class B1 (ISIN AU3FN0017927) notes affirmed at 'A+sf'; Outlook revised to Positive from Stable.
PUMA Series 2013-1 (PUMA 2013-1)
AUD998m Class A (ISIN AU0000PUJHA3) notes affirmed at 'AAAsf'; Outlook Stable.
PUMA Series 2014-1 (PUMA 2014-1)
AUD1,247.7m Class A (ISIN AU0000PUKHA) notes affirmed at 'AAAsf'; Outlook Stable.