OREANDA-NEWS. Fitch Ratings has assigned final ratings to Series 2015-1 REDS Trust's residential mortgage-backed floating-rate notes. The issuance consists of notes backed by first-ranking Australian residential mortgages originated by Bank of Queensland Limited (BOQ, A-/Stable/F2). The ratings are as follows:

AUD828.0m Class A notes: 'AAAsf'; Outlook Stable;
AUD50.4m Class AB notes: 'NRsf';
AUD16.2m Class B notes: 'NRsf';
AUD4.5m Class C notes: 'NRsf'; and
AUD0.9m Class D notes: 'NRsf'.

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

At the cut-off date, the total collateral pool consisted of loans that have been conservatively underwritten. The weighted-average (WA) seasoning of the portfolio is 38.7 months, with a WA unindexed loan to value ratio (LVR) of 49.5%, and WA indexed LVR of 48.5%. The average obligor current loan size is AUD229,901, with investment and interest-only loans representing 30.5% and 20.8% of the pool respectively.

KEY RATING DRIVERS
Interest is paid sequentially (after expenses) towards all notes. The reimbursement of all losses is paid after the distribution of interest on the Class D notes. Principal will initially be allocated sequentially. However, once the step-down conditions are met, principal will be allocated pro rata towards all notes.

The Class A notes may be redeemed in full on the scheduled maturity date in March 2020. The redemption of the notes will be funded through the issuance of refinancing notes to be known as Class A-R. In the event the Class A notes are not refinanced on the scheduled maturity, the Class A coupon will step-up by an additional 35bps.

Liquidity support will be provided via excess spread, principal draws and a liquidity reserve sized at 1.5% of the aggregate invested notes balance. The liquidity reserve will amortise, subject to the floor of AUD1.35m.

BOQ is a well-established originator with extensive experience in mortgage lending. BOQ originates primarily through its network of owner managed branches, with the remainder being originated through its own BOQ retail branches.

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 result in negative rating actions on the notes. Fitch has evaluated the sensitivity of the ratings assigned to Series 2015-1 REDS Trust to increased defaults and decreased recovery rates over the life of the transaction.

The analysis found that the Class A notes' ratings remained stable under the mild and severe default and recovery scenarios. However, the Class A notes were sensitive to a combination of mild and severe increased default stress of 15% and 30% and reduced recovery rate stress of 15% and 30%, with the rating decreasing to 'AAsf'.

The transaction structure supports a lenders' mortgage insurance (LMI) independent rating 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 "Series 2015-1 REDS Trust", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.