Fitch Ratings has upgraded two and affirmed three classes of notes from two Auswide transactions.
The transactions -
After the publication of the updated APAC Residential Mortgage Rating Criteria on
RATING ACTIONS
Entity / Debt
Rating
Prior
A AU3FN0025151
LT
AAAsf
Affirmed
AAAsf
AB AU3FN0025169
LT
AAAsf
Affirmed
AAAsf
B AU3FN0025177
LT
AAAsf
Upgrade
AA+sf
C AU3FN0025185
LT
AAAsf
Upgrade
AA-sf
A AU3FN0036745
LT
AAAsf
Affirmed
AAAsf
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Resilient Asset Performance: The transactions' 30+ day and 90+ day arrears were in line or below Fitch's 1Q21 Dinkum RMBS index at
The 'AAAsf' weighted-average foreclosure frequency (WAFF) for
Credit Enhancement Supports Ratings: All 'AAAsf' rated notes have subordination that is at least 2.4x the 'AAAsf' portfolio loss from the most recent 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.
Structural features include liquidity reserves sized at 1% of the asset balances with a floor of AUD300,000 and
Low Operational Risk: Auswide is an authorised deposit-taking institution headquartered in Bundaberg,
Economic Rebound Supports Outlook: The Stable Outlook is supported by
The loans in the transactions are concentrated in
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The transaction's 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 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.
The rating sensitivity section provides insight into the model-implied sensitivities the transaction faces when assumptions - WAFF or WARR - 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 transaction is exposed to multiple dynamic risk factors.
Fitch's previous rating sensitivities for ABA 2017-1 were discussed in 'Fitch Assigns Final Ratings to
Downgrade Sensitivity (
Note: A /AB / B/ C
Rating: AAAsf / AAAsf / AAAsf / AAAsf
Increase defaults by 15%: AAAsf / AAAsf / AAAsf / AAAsf
Increase defaults by 30%: AAAsf / AAAsf / AAAsf / AAAsf
Reduce recoveries by 15%: AAAsf / AAAsf / AAAsf / AAAsf
Reduce recoveries by 30%: AAAsf / AAAsf / AAAsf / AAAsf
Increase defaults by 15% and reduce recoveries by 15%: AAAsf / AAAsf / AAAsf / AAAsf
Increase defaults by 30% and reduce recoveries by 30%: AAAsf / AAAsf / AA+sf / AA+sf
The transaction structure supports LMI-independent ratings for the class
The class C notes can withstand a two-notch downgrade of the LMI providers' ratings.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The rated notes are at 'AAAsf', which is the highest level on Fitch's scale. The ratings cannot be upgraded.
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 the rating action on both transactions.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information as part of its ongoing monitoring.
Prior to the transaction closing, Fitch sought to receive a third-party assessment conducted on the asset portfolio information, but none was made available to Fitch for these transactions.
Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator'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, and together with any assumptions referred to above, Fitch's assessment of the information 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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