S&P: SMHL Series 2008-1 Fund Class A Rating Affirmed
The rating affirmation follows the issuance of A$350 million in class A bonds and A$13.5 million in class B bonds, increasing the aggregate total amount of class A and class B bonds issued to approximately A$2.42 billion. The proceeds from the bond issue, along with A$25 million held in cash, will be used to fund the acquisition of additional loans, as contemplated in the transaction structure.
The affirmation reflects:Our view of the credit risk of the underlying collateral portfolio, which has a weighted-average current loan-to-value ratio of 62.9% and weighted-average loan seasoning of 64.6 months. Our view that the support provided by lenders' mortgage insurance (LMI) policies covering 52.96% of the pool of mortgages and the 3.7% subordination provided by the class B bonds are sufficient to withstand the stresses commensurate with the rating. The LMI policies on the insured loans cover 100% of the outstanding principal of the loans insured, including accrued interest during the recovery period and reasonable realization costs. Our expectation that the liquidity reserve, equal to 1.6% of the bonds outstanding within the transaction, is adequate under our stress assumptions to ensure timely payment of interest. Members Equity Bank Ltd.'s underwriting standards, processes, and servicing quality, which are consistent with industry wide practices. The benefit of a fixed-rate swap provided by National Australia Bank Ltd. to hedge fixed-rate loans in the mortgage pool. The pool is made up entirely of full-documentation loans for which the income of the borrower has been fully verified.
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