Feb 28 - Fitch Ratings has affirmed the Class A notes issued by Korea ACE Mortgage Company (Korea ACE) as listed below. Korea ACE is a RMBS securitisation backed by South Korean residential mortgages originated by Citibank Korea Inc. (A-/Stable/F1).
USD48,960,234 Class A floating-rate secured notes due 2038 affirmed at ‘AAAsf’; Outlook Stable
Key Rating Drivers
The affirmation reflects higher credit enhancement (CE) at 40% compared with the CE at closing of 12.5% and satisfactory collateral performance. Fitch expects continued amortisation of the portfolio to further bolster CE, supporting the Stable Outlook.
The agency also expects moderate GDP growth and stable employment in South Korea, which should continue to support households’ mortgage payments despite high household leverage. In Fitch’s view, the low loan-to-value (LTV) ratio of Korea ACE’s portfolio should provide incentives for borrowers to continue servicing mortgage payments.
Delinquency and foreclosure rates in Korea ACE remain low and well within Fitch’s expectations. The three-month average delinquent mortgage loan ratio, defined as loans between 60-89 days past due, decreased to 0% at end-January 2013 from 0.07% at end-February 2012, well below the transaction’s trigger at 2.75%. Loans under foreclosure were also minimal at 0.06% of the pool balance at end-January 2013. There have been no losses resulting from defaults due to the generally low LTV ratio which supported full recoveries.
The outstanding portfolio balance has amortised to 21.5% of the initial portfolio balance according to the servicer report for December 2012.
In Fitch’s rating sensitivity analysis, the likelihood of a downgrade is remote, based on transaction performance. Assuming a Fitch weighted average ‘AAAsf’ loss severity of 35.2%, the ‘AAAsf’ rating may face downgrade pressure if, for example, the default rate increased to above approximately 81%.