Murray Trust Repo Series No.1 RMBS Class A Note Rating Affirmed After Note Issuance

Stocks and Financial Services Press Releases Tuesday March 15, 2016 16:03
MELBOURNE--15 Mar--Standard & Poor's

MELBOURNE (Standard & Poor's) March 15, 2016--Standard & Poor's Ratings Services today affirmed its 'AAA (sf)' rating on the class A residential mortgage-backed securities (RMBS) issued by Perpetual Ltd. as trustee for Murray Trust Repo Series No.1.

The rating affirmation follows the issuance of class A notes that increased the aggregate total amount of class A and class B notes issued to approximately A$135.5 million. The proceeds from the note issuance will be used to fund the acquisition of additional loans, as contemplated in the transaction structure

The affirmation reflects:
Our view of the credit risk of the underlying collateral portfolio, which has a weighted-average current loan-to-value ratio of 68.8% and weighted-average loan seasoning of 53.5 months.

More than 68% of the collateral pool is concentrated in three postcodes, reflective of Hume Bank Ltd.'s branch footprint. We have increased the default frequency in our credit assessment of the portfolio to reflect our view that clustered geographic distributions are at greater risk of being adversely affected by a localized economic downturn. At 97.7%, the portfolio contains a heavy concentration of security properties that we classify as nonmetropolitan.

We have increased the default frequency and assumed a longer foreclosure period for such loans.

Our view that the support provided by lenders' mortgage insurance (LMI) policies covering 46.2% of the pool of mortgages and the 6.6% subordination provided by the class B notes are sufficient to withstand the stresses commensurate with the rating.

The LMI policies on the insured loans cover 100% of the outstanding principal of the loans insured, including accrued interest during the recovery period and reasonable realization costs.

Our expectation that the liquidity reserve, equal to 2.5% of the notes outstanding within the transaction, is adequate under our stress assumptions to cover timely payment of interest.Hume Bank's underwriting standards, processes, and servicing quality, which are consistent with industrywide practices.

There is no swap in this transaction. All loans acquired by the trust must be variable rate.

Hume Bank can convert variable-rate loans in the pool to fixed rate, provided the aggregate percentage of the pool (by balance), which is fixed rate, does not exceed 2%. The current pool consists of 1.5% fixed-rate loans.

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