May 26, 2016 / 4:31 AM / a year ago

Fitch Affirms Ratings on Eight SWAN Trust RMBS Tranches

(The following statement was released by the rating agency) SYDNEY, May 26 (Fitch) Fitch Ratings has affirmed the ratings of eight tranches from three SWAN Trust RMBS transactions. The transactions are backed by pools of Australian conforming residential mortgages originated by the Bank of Western Australia, now part of the Commonwealth Bank of Australia Limited (AA-/Stable). The rating actions are listed at the end of this commentary. KEY RATING DRIVERS The affirmations reflect Fitch's view that the available credit enhancement is sufficient to support the notes' current ratings and the agency's expectations of Australia's economic conditions. Credit quality and performance of the underlying loans remain within Fitch's expectations. As per the APAC Residential Mortgage criteria, the default model was not run for the three transactions as a review of pre-determined performance triggers indicates the transactions display stable asset performance. At 31 March 2016, Series 2010-1 SWAN Trust had the highest level of 30+ arrears at 1.9%. This was above the Fitch Dinkum Index of 0.95%. Series 2010-2 SWAN Trust had the lowest level of 30+ arrears, at 0.5%, and Series 2011-1 SWAN Trust had arrears at 1.3%. Losses remain low since closing, totalling AUD233,599 across two of the three transactions. Series 2011-1 SWAN Trust has not experienced any losses since closing. All losses to date were covered by lenders' mortgage insurance (LMI), excess spread or the servicer. Fitch's weighted-average LVRs ranged from 42.9% in Series 2010-1 SWAN Trust to 49.6% in Series 2010-2 SWAN Trust. The weighted-average seasoning is greater than five years for each transaction. Around 40% of the collateral backing the pools is concentrated in Western Australia. The underlying pools are fully covered by LMI, provided by QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength Rating: AA-/Stable). The transactions have satisfied their respective documented step-down conditions, with subordination available to the rated notes at least double that provided at issuance. Series 2011-1 SWAN Trust features a fixed-rate, soft-bullet note, class A2, with a refinancing date five years after issuance. RATING SENSITIVITIES The ratings are not expected to be affected by any foreseeable change in performance. The pro-rata amortisation will switch to sequential when the call-option triggers are met, mitigating tail-risk. Other than the class AB notes of Series 2010-1 SWAN Trust, the notes' ratings are independent of downgrades to the LMI provider's ratings. The class AB notes could withstand a three-notch downgrade to the LMI insurer. DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action. DATA ADEQUACY Fitch conducted a review of 10 sample loan files focusing on the underwriting procedures conducted by Bank of Western Australia compared to its credit policy at the time of underwriting. Fitch checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis. Full list of rating actions, with note balances as at March 2016: Series 2010-1 SWAN Trust: AUD110.6m Class A notes (ISIN AU3FN0010435) affirmed at 'AAAsf'; Outlook Stable AUD9.4m Class AB notes (ISIN AU3FN0010443) affirmed at 'AAAsf'; Outlook Stable Series 2010-2 SWAN Trust: AUD160.9m Class A3-R notes (ISIN AU3FN0029492) affirmed at 'AAAsf'; Outlook Stable AUD15.1m Class AB notes (ISIN AU3FN0012217) affirmed at 'AAAsf'; Outlook Stable AUD7.7m Class AC notes (ISIN AU3FN0012225) affirmed at 'AAAsf'; Outlook Stable Series 2011-1 SWAN Trust: AUD6.9m Class A1 notes (ISIN AU3FN0014387) affirmed at 'AAAsf'; Outlook Stable AUD100.0m Class A2 notes (ISIN AU3CB0185106) affirmed at 'AAAsf'; Outlook Stable AUD8.1m Class AB notes (ISIN AU3FN0014395) affirmed at 'AAAsf'; Outlook Stable A comparison of the transaction's representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports under Related Research below. Contacts: Lead Surveillance Analyst Hai Duong Le Associate Director Phone +61 2 8256 0358 Fitch Australia Pty Ltd. Level 15, 77 King St, Sydney, NSW 2000 Committee Chairperson Natasha Vojvodic Senior Director +61 2 8256 0350 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available at www.fitchratings.com Sources of Information: The source of information used to assess these ratings is the Commonwealth Bank of Australia. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Applicable Criteria APAC Residential Mortgage Criteria (pub. 23 Jun 2015) here Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014) here Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014) here Global Criteria for Lenders' Mortgage Insurance in RMBS (pub. 23 Jun 2015) here Global Structured Finance Rating Criteria (pub. 06 Jul 2015) here Related Research Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions (Applicable to Transactions Rated from Sept.26, 2011 until June 15, 2015) here Series 2010-1 SWAN Trust (Australia RMBS) here Series 2010-2 SWAN Trust here Series 2011-1 SWAN Trust here Series 2011-1 SWAN Trust - New Issue Appendix here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1005130 Solicitation Status here Endorsement Policy here ail=31 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.

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