• LOGIN
• |
• REGISTER
• |
• 

The recovering Australian securitisation market has received a further boost with Moody's expecting rating on both prime and non-conforming RMBS to remain stable over next 12-18 months.

In its structured finance 2009 review and 2010 outlook, Moody's noted a number of factors contributing to the stability of prime RMBS ratings.

For prime RMBS, it listed the following as key factors:

• The majority of the senior notes benefit from increased credit enhancement due to quick build-up in subordination from junior notes given the pass through amortization structure of senior notes. 
• Potential rating migration of senior and mezzanine notes due to any rating downgrades of mortgage insurers is minimal. Moody's analysis shows this to be particularly the case where mortgage insurers' ratings remain at A3 or better. Genworth and QBE LMI are currently rated at A1 and Aa3 respectively.
• Ratings of junior notes are directly linked6 to those of mortgage insurers and are expected to be stable as ratings of mortgage insurers are expected to remain stable

In the case of non-conforming RMBS, it said ratings were expected to be stable in the next 12 months due to the following factors:

• Non-conforming lenders have maintained high levels of excess available income through the financial crisis. The excess spread is expected to be stable and will serve as the first line of protection against any potential credit losses.
• Majority of the outstanding transactions have incurred lower-than-expected cumulative losses. Most transactions have built up a healthy credit reserve fund, and experienced very limited charge-offs on unrated equity pieces. 
• The current levels of credit protection to most rated notes (through excess spread, hard subordination, or reserve funds) are sufficient to withstand significantly adverse collateral performance.

Related stories:

BoQ looking to replicate RMBS success - The recent success of AMP and Westpac's RMBS transactions has inspired the Bank of Queensland to put forth a $500m RMBS issue

Your comment