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Fitch Affirms Illawarra Series IS Trust at 'AAAsf'; Outlook Stable.

Sydney: Fitch Ratings has affirmed Illawarra Series IS Trust's Class A notes at 'AAAsf'. The transaction is a securitisation of Australian conforming residential mortgages originated by IMB Limited (IMB). The rating action is as follows:

AUD441m Class A notes affirmed at 'AAAsf'; Outlook Stable.


The affirmation reflects 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. The credit quality and performance of the loans in the collateral pools also remain in line with expectations.

The transaction has low levels of defaults and arrears. At 31 March 2016, 30+ days arrears stood at 0.2%, below Fitch's 4Q15 Dinkum Index of 0.95%. There has been one foreclosure since issuance, resulting in a loss of AUD221,591. Lenders' mortgage insurance (LMI) covered approximately 99.9% of the claim submitted, with the remaining amount covered by excess spread. LMI covered 52.1% of the pool as at 31 March 2016; with 40.2% covered by Genworth Financial Mortgage Insurance Pty Limited (Insurer Financial Strength Rating: A+/Stable) and 11.9% QBE Lenders Mortgage Insurance Ltd (Insurer Financial Strength Rating: AA-/Stable).

Illawarra Series IS Trust features a 10-year substitution period, which ends in April 2024. Fitch is comfortable with the long revolving period due to the presence of various eligibility criteria and pool parameters, and the portfolio's performance to date.


The class A notes are currently independent of downgrades to the LMI providers' ratings. The class A notes may become dependent on the LMI providers' ratings should the transaction's portfolio materially change during the revolving period. At Fitch's 'AAAsf' breakeven default rate of 14.82%, the class A notes can withstand an additional 19.47% defaults at Fitch's 'AAAsf' loss severity.


No third party due diligence was provided or reviewed in relation to this rating action.


Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by IMB compared to its credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.

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 and/or links under Related Research below.

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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:May 10, 2016
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