OREANDA-NEWS. Fitch Ratings has assigned final ratings to National RMBS Trust 2015-1's residential mortgage-backed floating-rate notes. The issuance consists of notes backed by first-ranking Australian residential mortgages originated by National Australia Bank Limited (NAB, AA-/Stable/F1+). The ratings are as follows:

AUD1,610m Class A notes: 'AAAsf'; Outlook Stable;
AUD105m Class B notes: 'A+sf'; Outlook Stable; and
AUD35m Class C notes: 'NRsf'.

The notes were issued by Perpetual Trustee Company Limited in its capacity as trustee of National RMBS Trust 2015-1.

KEY RATING DRIVERS

The 'A+sf' final rating assigned to the Class B note is one notch above the expected rating of 'A(EXP)sf' due to the improved characteristics of the upsized portfolio.

The credit quality of the upsized portfolio is significantly stronger in comparison to the pool analysed in the presale report. The weighted average (WA) unindexed loan to value ratio (LVR) has fallen to 60.6%, substantially lower than the previous portfolio's WA LVR of 64.2%. Investment loans represent 19.6% of the upsized pool by balance, and interest-only loans represent 23.4%.

The transaction has an initial Class A subordination of 8.0%. Interest is paid sequentially (after expenses) towards the Class A, B and then C notes. The reimbursement of all losses is paid after the distribution of interest on the Class B notes. Principal will be allocated pro rata to the Class A, B and C notes should certain conditions be met.

The Class C notes' interest is ranked at the bottom of the interest waterfall, ensuring that the transaction benefits from an increased amount of excess spread, which is available to cover losses and charge-offs as well as withstand liquidity shocks.

Liquidity support will be provided via excess spread, principal draws and a liquidity facility sized at 1.9% of the notes' balance, with a facility floor of AUD3.325m. The liquidity facility will amortise, subject to the floor, while performance-based triggers are satisfied.

NAB has considerable experience in mortgage lending and servicing. The bank originates loans through its nationwide branch network, mobile sales force, online and telephone sales operations. Arrears levels of securitised National RMBS transactions have historically tracked below Fitch's Dinkum Index for prime RMBS.

RATING SENSITIVITIES

Unexpected decreases in residential property values, increases in the frequency of foreclosures, and loss severity on defaulted mortgages could produce loss levels higher than Fitch's base case, which could potentially result in negative rating actions on the notes. Fitch has evaluated National RMBS Trust 2015-1's ratings sensitivity to increased defaults and decreased recovery rates over the life of the transaction. Its analysis found that the Class A notes' ratings remained stable under each of Fitch's mild and severe default and recovery scenarios. However, under the combination scenario of 30% increased defaults and 30% decrease in recovery rates, the Class A rating dropped to 'AAsf'.

The analysis found the Class B notes' ratings were sensitive to the mild and severe default and recovery scenarios. Under an increased default stress of 15% and 30%, the Class B rating dropped to 'Asf'. Under a reduced recovery rate stress of 15% and 30%, the Class B rating dropped to 'Asf' and 'BBB+sf' respectively. The rating was severely impacted by the combination scenario of 15% and 30% increased defaults and 15% and 30% decrease in recovery rates, with the rating dropping to 'A-sf' and 'BBB-sf' respectively.

The transaction structure supports lenders' mortgage insurance (LMI) independent ratings for the Class A notes. Therefore LMI is not required to support the rating due to the level of credit support provided by the lower notes.

Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled "National RMBS Trust 2015-1", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.