Industry super fund-owned bank ME has been assigned an Aaa credit rating for its first transaction of residential mortgage-backed securities in 2015.
Moody’s Investors Service assigned the long-term provisional rating to the $460 million transaction – a securitisation of a portfolio of Australian prime residential mortgages originated by ME, with rate notes to be issued by its trustee, Perpetual Limited.
The credit ratings agency said 68 per cent of the loans in the portfolio benefit from LMI policies covering losses up to 100 per cent of the principal amount, the accrued interest of each loan and reasonable expenses involved in enforcing the mortgage.
Moody’s said the rating also takes into account other factors, including: “A liquidity facility provided by ME, with a required limit equal to 1.00 per cent of the aggregate outstanding balance of the mortgage loans”; the threshold rate; a fixed-rate swap provided by ANZ "to hedge any mismatch between the interest rates charges on the fixed-rate loans and payable on the floating rate notes"; and ME’s experience in servicing residential mortgage portfolios.
“ME currently has 20 active public securitisation transactions, which highlights ME’s experience as a manager and servicer of securitised transactions,” it said in a statement.
Moody’s added that one factor that could lead to a downgrade of ME’s rating is a “worse-than-expected collateral performance”.
“Other reasons for worse performance than Moody’s expects include poor servicing, error on the part of transaction parties, a deterioration in credit quality of transaction counterparties, lack of transactional governance and fraud.”