January 12, 2017 / 6:16 AM / a year ago

Fitch Affirms Five Ratings of Three AIMS RMBS transactions

(The following statement was released by the rating agency) SYDNEY, January 12 (Fitch) Fitch Ratings has affirmed the ratings of five tranches of three AIMS residential mortgage backed securities (RMBS) transaction. The transactions are securitisations of first-ranking Australian residential mortgages originated by AIMS Home Loans Pty Limited and Loancorp Pty Limited. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS The affirmations reflect Fitch's view that available credit enhancement is sufficient to support the notes' current ratings and can withstand deterioration in Australia's economic conditions in line with the agency's expectations. The credit quality and performance of the loans in the collateral pools also remains in line with expectations. The class B ratings for all three transactions benefit from lenders' mortgage insurance (LMI) and excess spread. Arrears for the transactions, as a percentage, tend to be volatile due to the relatively small size of the pools, but arrears balances have remained stable over the past year. The AIMS 2004-1 Trust, AIMS 2005-1 Trust and AIMS 2007-1 Trust transactions had 30+ day arrears at 2.8%, 2.2% and 0%, respectively, as at November 2016. Fitch considers all loans marked in arrears or in hardship as being in arrears, which has resulted in additional loans being marked in arrears compared with AIMS reporting. No defaults were recorded in any AIMS transactions over the year ending November 2016. Losses on the underlying mortgages in the pool have been covered primarily by LMI. All loans contained in the collateral pools have LMI in place, with policies provided by QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength rating: AA-/Stable) and Genworth Financial Mortgage Insurance Pty Limited (Insurer Financial Strength rating: A+/Stable). Any losses not covered by LMI have been covered by excess spread. The transactions are well-seasoned between 10.5 years and 13.3 years. Fitch's calculated weighted-average indexed loan to value ratios were 34.4% for AIMS 2004-1 Trust, 41.3% AIMS 2005-1 Trust and 42.3 % for AIMS 2007-1 Trust as a result, compared with 51.6%, 58.8% and 59.3%, respectively, before indexation. Each pool is geographically concentrated in New South Wales, which Fitch has taken into account in its analysis. RATING SENSITIVITIES Sequential paydown has increased credit enhancement for each transaction's senior notes, with the 'AAAsf' rated notes able to withstand many multiples of the latest reported arrears. The 'AAAsf' modelled default rates were 12.2% for AIMS 2005-1 Trust and 12.7% for AIMS 2007-1 Trust. The class A notes can withstand 100% in defaults at Fitch's 'AAAsf' loss severity and are LMI independent, meaning they are not sensitive to downgrades of the LMI providers' ratings. This analysis excludes credit to excess spread, which has been strong and stable in each transaction. The ratings of all AIMS RMBS transactions' class A notes are independent of downgrades to the LMI providers' ratings. Class B notes may be downgraded if there were to be a significant reduction in LMI claim payments or excess spread. There have been no charge-offs to date on the class B 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. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio as part of its ongoing monitoring. As part of its ongoing monitoring, Fitch conducted a file review of a small targeted sample of AIMS Financial Group'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 AIMS Financial Group as at 30 November 2016 Transaction reporting data provided by AIMS Financial Group as at 20 December 2016 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: AIMS 2004-1 Trust: AUD14.8 m Class B (ISIN AU300AIM2043) affirmed at 'Bsf'; Outlook Stable AIMS 2005-1 Trust: AUD5.1m Class A (ISIN AU300AIM3017) affirmed at 'AAAsf'; Outlook Stable AUD12.8m Class B (ISIN AU300AIM3025) affirmed at 'Bsf'; Outlook Stable AIMS 2007-1 Trust: AUD4.2m Class A (ISIN AU3FN0002663) affirmed at 'AAAsf'; Outlook Stable AUD16.3m Class B (ISIN AU3FN0002671) affirmed at 'Bsf'; Outlook Stable Contacts: Lead Surveillance Analyst James Zanesi Director +61 2 8256 0306 Fitch Australia Pty Ltd Level 15, 77 King St, Sydney NSW 2000 Committee Chairperson Claire Heaton Senior Director +61 2 8256 0361 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available at www.fitchratings.com Applicable Criteria APAC Residential Mortgage Criteria (pub. 30 Aug 2016) here Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016) here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 18 Jul 2016) here Global Criteria for Lenders' Mortgage Insurance in RMBS (pub. 28 Jul 2016) here Global Structured Finance Rating Criteria (pub. 27 Jun 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1017445 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC 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. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. 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Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. 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