(The following statement was released by the rating agency)
July 02 -
-- Today’s rating actions follow a review of the latest performance data available for Seiza Augustus Series 2007-1 Trust.
-- We have affirmed the ratings on three classes of notes.
-- The notes issued by the trustee of Seiza Augustus Series 2007-1 Trust are backed by a portfolio of residential and small-ticket commercial mortgage loans originated by Seiza Mortgage Company Pty Ltd.
Standard & Poor’s Ratings Services today affirmed its ratings on three classes of notes issued by the trustee of Seiza Augustus Series 2007-1 Trust (see list). The notes are backed by a portfolio of residential and small-ticket commercial mortgage loans originated by Seiza Mortgage Company Pty Ltd. The rating affirmations reflect our view that the rated notes are able to withstand stresses that are commensurate with their current rating levels.
Based on our latest performance review of the transaction, the notes are performing within our current rating expectations. The class C notes have benefited from the increase in credit enhancement as a proportion of the outstanding balance as the portfolio amortizes.
Nevertheless, the pool faces rising adverse selection risk at the tail end of the transaction, whereby borrowers that are susceptible to financial difficulties may remain in the pool.
The concentration of borrowers with large loans is high, with the top five borrowers (with loan balances of at least A$1.5 million) accounting for about 22% of the portfolio as of June 20, 2012. The top 20 borrowers form 59% of the portfolio, each with a loan size of at least A$630,000. The total portfolio consists of 96 loans that make the portfolio susceptible to further concentration risks.
The portfolio historically had a large proportion of interest-only loans that all have reverted to principal amortizing loans, as of February 2012. We believe this may result in significant payment adjustments for some borrowers, possibly causing further increases in arrears.
Arrears as a percentage of the total portfolio balance are 8.4% as of June 20, 2012. Cumulative net loss as a percentage of the original portfolio balance is 7.5%. Excess spread for the transaction has covered less than half of the cumulative net losses to date.
We expect that the pool will continue to have a slow repayment rate. We have observed a large decline in the market value of properties in the portfolio, with sales proceeds as a percentage of the original property valuation at 60.6% as of May 20, 2012.
Although we expect further defaults and losses to emerge, the current credit enhancements are commensurate with the current ratings on the notes.
C BBB+ (sf)
D B- (sf)
E CCC- (sf)
The class F note is in default and rated ‘D’.
-- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012
-- Australia And New Zealand Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors On Ratings, March 29, 2012
-- Australian RMBS Rating Methodology and Assumptions, Sept. 1, 2011
-- Principles Of Credit Ratings, Feb. 16, 2011
-- Repayment Structures Of Australian RMBS and ABS Play An Important Role in Supporting Ratings Stability, Aug. 16, 2010
-- Methodology and Assumptions for Analyzing the Cash Flow and Payment Structures Of Australian and New Zealand RMBS, June 2, 2010