WB Trust 2008-1 #AAA (sf)# Rating Affirmed After Note Issuance

Stocks and Financial Services Press Releases Tuesday August 8, 2017 17:20
MELBOURNE--8 Aug--S&P Global Ratings

MELBOURNE (S&P Global Ratings) Aug. 8, 2017--S&P Global Ratings today affirmed its 'AAA (sf)' rating on the class A residential mortgage-backed securities (RMBS) issued by Perpetual Trustee Co. Ltd. as trustee for WB Trust 2008-1.

The rating affirmation follows the acquisition of approximately A$42 million of loans to be funded by the issuance of class A notes, as contemplated in the transaction structure. Total notes on issue now equate to A$317.10 million.

The affirmation reflects: Our view of the credit risk of the underlying collateral portfolio, which has 1,106 consolidated loans and a weighted-average current loan-to-value ratio of 77.9% and weighted-average loan seasoning of 77.8 months. Some 56.8% of the portfolio is security properties that we classify as nonmetropolitan.

Our view is that defaults on nonmetropolitan properties would be more frequent during periods of economic stress because of population and economic factors.

Some 34.9% of the portfolio is interest-only loans, reverting to fully amortizing, and a further 8.5% of loans are line of credit. S&P Global Ratings' view is that certain products, including loans with interest-only periods, bullet repayments, and significant residual principal repayment at maturity (also known as balloon loans), can heighten a borrower's sensitivity to changes in macroeconomic factors during an economic downturn.

Some 81.8% of the properties in the portfolio are in Queensland, representing a significant geographic-concentration risk.
Our geographic-concentration limit for Queensland is 40%, as per table 2 of our "Australian RMBS Rating Methodology And Assumptions" criteria, published on Sept. 1, 2011.
Our view is that more clustered geographic distributions are at greater risk of being adversely affected by a localized economic downturn.
Transaction performance has been within expectations since transaction close. A total of 2.4% of the loans in the pool are in arrears as of June 30, 2017, of which 1.2% are more than 90 days in arrears.
There has been A$4.9 million of losses to date, most of which have been covered by lenders' mortgage insurance (LMI) and a small amount covered by excess spread.

The credit support provided to the class A notes of 16.08%, by way of subordination of the class B notes, is commensurate with the 'AAA (sf)' assessed credit support, after credit being given to LMI and is thereby sufficient to withstand the stresses commensurate with the rating.The support provided by LMI policies covering 47.3% of the pool of mortgages.

The LMI providers in this transaction are QBE Lenders' Mortgage Insurance Ltd. and Genworth Financial Mortgage Insurance Pty Ltd. 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, equaling A$6.7 million of the notes outstanding within the transaction, is adequate under our stress assumptions to cover timely payment of interest.The structure incorporates a substitution period that ends on July 31, 2021.

During the substitution period, the structure permits the trapping of principal up to a capped amount, which can be used to acquire additional eligible receivables. To mitigate the potential for negative carry risk due to the buildup of principal over time, any amount in excess of the capped amount is to be passed through and applied to principal collections to repay noteholders.

The interest-rate swap provided by Auswide Bank Ltd. and supported by Australia and New Zealand Banking Group Ltd. as the standby swap provider to hedge the receipts from fixed-interest loans against the floating-rate obligations of the trust.

The servicer can only convert variable-rate loans to fixed-rate loans if the amount of fixed-rate loans in the portfolio is less than 60%. Fixed-rate loans currently make up 33.0% of the portfolio.

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