Fitch Ratings has affirmed five note classes from two Auswide transactions at 'AAAsf' with a Stable Outlook.
The transactions -
RATING ACTIONS
Entity / Debt
Rating
Prior
A AU3FN0036745
LT
AAAsf
Affirmed
AAAsf
A AU3FN0025151
LT
AAAsf
Affirmed
AAAsf
AB AU3FN0025169
LT
AAAsf
Affirmed
AAAsf
B AU3FN0025177
LT
AAAsf
Affirmed
AAAsf
C AU3FN0025185
LT
AAAsf
Affirmed
AAAsf
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Asset Performance Supports Ratings: The 30+ day arrears, at 1.6% for
Credit Enhancement Supports Ratings: Asset and cash flow modelling was not performed for this review, in line with Fitch's APAC Residential Mortgage Rating Criteria. All rated notes have subordination of at least 1.6x the 'AAAsf' portfolio loss from the last model run. Both transactions are paying down pro rata and will revert to sequential pay if performance deteriorates or the transactions reach the clean-up call date.
Low Operational Risk: Auswide is an authorised deposit-taking institution headquartered in Bundaberg,
Tight Labour Market Supports Outlook: Portfolio performance is supported by
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Transaction performance may be affected by changes in market conditions and the economic environment. Weakening asset performance is strongly correlated with increasing levels of delinquencies and defaults that could reduce the credit enhancement available to the notes.
Downgrade Sensitivity
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case and are likely to result in a decline in credit enhancement and remaining loss-coverage levels available to the notes. Decreased credit enhancement may make certain note ratings susceptible to negative rating action, depending on the extent of the coverage decline. Hence, Fitch conducts sensitivity analysis by stressing a transaction's initial base-case assumptions.
This section provides insight into the model-implied sensitivities the transaction faces when assumptions - weighted-average foreclosure frequency or weighted-average recovery rate - are modified, while holding others equal. The modelling process uses the modification of default and loss assumptions to reflect asset performance in up and down environments. The results should only be considered as one potential outcome, as the transactions are exposed to multiple dynamic risk factors. Fitch modifies the pre-lenders' mortgage insurance recovery rate to isolate the effect of a change in recovery proceeds at the borrower level.
Fitch's rating sensitivities for the transactions were discussed in the following rating action commentaries:
Fitch Assigns Final Ratings to
Fitch Upgrades 2, Affirms 3 Classes in 2 Auswide Transactions; Removes from UCO
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
The rated notes are at the highest level on Fitch's scale and cannot be upgraded. Therefore, upgrade sensitivity scenarios are not relevant.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
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 has not reviewed the results of any third-party assessment of the asset portfolios as part of its ongoing monitoring.
Prior to
Prior to ABA 2017-1's transaction 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 Auswide'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 portfolios.
Overall, Fitch's assessment of the information on the asset pools relied upon for the agency's rating analysis, according to its applicable rating methodologies, indicates that it is adequately reliable.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
Additional information is available on www.fitchratings.com
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