The FINANCIAL — Sydney-08 August 2011: Fitch Ratings has affirmed 31 classes of notes issued by seven Interstar and five Challenger RMBS Series, while 10 remain on Rating Watch Negative (RWN) following the publication of Fitch's exposure draft on lenders' mortgage insurance (LMI) in RMBS.
These 12 transactions are backed by pools of Australian conforming residential mortgages originated through a network of mortgage originators and brokers under the Interstar and Challenger Millennium Trust Securitisation programmes. The full list of rating actions can be found at the end of this commentary.
The affirmations of the notes reflect Fitch's view that the available credit enhancement is able to support the notes at their current rating levels. The credit quality and performance of the loans in the collateral pools remain in line with the agency's expectations.
Interstar 2005-2L, Interstar 2006-3L and Challenger 2007-2L have underlying mortgage pools comprising of at least 90% low-doc loans. Their 30+ day arrears as at 31 May 2011 were 5.29%, 3.67% and 6.44%, respectively, compared to Fitch's 30+ Day Low-doc Dinkum Index which measures industry wide performance of 5.45%.
The three most recent Challenger transactions – Challenger 2008-1, Challenger 2008-2 and Challenger 2009-1 – each contain less than 10% low-doc loans and had 30+ day arrears of 1% or less at end-May 2011, compared to Fitch's 30+ Dinkum of 1.79%. The other nine transactions each contain less than 30% low-doc loans; at end-May 2011 their 30+ day arrears ranged between 2.15%-3.73%. Arrears for all of these transactions are above Fitch's 30+ day Dinkum Index, in line with historical performance.
Interstar 2006-4H is comprised of high LVR loans, with 89% of the pool having LVRs greater than 80% while 30+ day arrears as at May 2011 were 3.01%, compared to Fitch's 30+ day Dinkum index of 1.79%. The Outlook on the Class AB notes remains Negative, highlighting sensitivity to further deterioration in asset performance.
All transactions have mortgage insurance in place, with policies provided by QBE Lenders Mortgage Insurance Ltd (Insurer Financial Strength Rating: 'AA-'/Outlook Stable) and Genworth Financial Mortgage Insurance Pty Ltd. To date all losses not covered by the mortgage insurers have been covered by Challenger Mortgage Management Pty Limited (Challenger).
There have been no losses to date as a consequence to the natural disasters of 2010/2011.
Fitch is maintaining the RWN on 10 class B notes as a result of the LMI exposure draft dated 17 May 2011. The RWN will be resolved within six months of the publication of the updated LMI criteria.
Discussion about this post