OREANDA-NEWS. Fitch Ratings has affirmed 27 and upgraded three tranches of nine Medallion Trust Series RMBS transactions. The transactions are securitisations of first-ranking Australian residential mortgages originated by Commonwealth Bank of Australia (CBA, AA-/Stable/F1+), and Homepath Limited (a wholly owned subsidiary of CBA that originates home loans online). The list of rating actions can be found at the end of this commentary.

KEY RATING DRIVERS
The affirmations reflect Fitch's view that 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 have remained in line with Fitch's expectations. The one-notch upgrades of the Class B notes of Medallion Series Trust 2012-1, Medallion Series Trust 2013-2, and Medallion Series Trust 2014-1's Class B notes also reflect the build-up of credit enhancement sufficient to achieve the higher ratings.

As at 30 November 2014, only Medallion Trust Series 2006-1G and Medallion Trust Series 2011-1 had 30+ days arrears levels above Fitch's 30+days Dinkum Index (3Q14: 1.08%), at 1.43% and 1.09% respectively. Losses across the portfolios since closing were low at AUD5.1m, and lenders' mortgage insurance (LMI) had paid 82.1% of submitted claims. Remaining losses were covered by excess spread or CBA. Gross losses since closing were highest in Medallion Trust 2006-1G and Medallion Trust 2007-1G, reaching 0.04% of the original pool balances of each transaction.

The Fitch-calculated weighted average loan-to-value (LVR) ratios ranged from 42.5% (Medallion Trust Series 2006-1G) to 59.6% (Medallion Trust Series 2014-2). All pools have benefitted from indexation, with Medallion Trust Series 2006-1G experiencing the largest improvement in LVR, to 32.7%.

All transactions have LMI provided by Genworth Financial Mortgage Insurance Pty Ltd (Insurer Financial Strength Rating: A+/Stable) or QBE Lenders' Mortgage Insurance Limited (Insurer Financial Strength Rating: AA-/Stable), with cover ranging from 12.5% to 100% of the portfolios.

RATING SENSITIVITIES
Sequential pay-down has increased credit enhancement for the senior notes of each transaction, with the 'AAAsf' rated notes able to withstand many multiples of the latest reported arrears.

The 'AAAsf' modelled loss severities after LMI ranged from 11.8% to 47.1% across the portfolios. The Class A4 notes of Medallion Trust Series 2007-1G were sensitive to default rates above 16.9%, whereas the Class A1 and A2 notes of Medallion Trust Series 2011-1 were the least sensitive, able to withstand default rates of 76%.

Sensitivity to default rates is generally greater among the mezzanine tranches of each transaction. The 'A+sf' rated Class B notes of the most recently issued Medallion Trust Series 2014-2 is sensitive to default rates above 6.4%.

The ratings of the Class B notes of Medallion Trust Series 2012-1, 2013-2, 2014-1 and 2014-2 are dependent on the LMI providers' ratings.

The Medallion Trust Series 2006-1G and Medallion Trust Series 2007-1G Class B notes' ratings are unlikely to change unless there is a significant reduction in LMI claims paid and Fitch considers that levels of excess spread are no longer adequate.

The rating actions are as follows:

Medallion Trust Series 2006-1G:
USD215.8m Class A-1 (ISIN US58403AAG31) notes affirmed at 'AAAsf'; Outlook Stable;
AUD215.8m Class A-2 (ISIN AU300MEDF010) notes affirmed at 'AAAsf'; Outlook Stable;
EUR48.6m Class A-3 (ISIN XS0247156127) notes affirmed at 'AAAsf'; Outlook Stable; and
AUD16.0m Class B (ISIN AU300MEDF028) notes affirmed at 'BBBsf'; Outlook Stable.

Medallion Trust Series 2007-1G:
AUD1,076.0m Class A-4 (ISIN AU3FN0001830) notes affirmed at 'AAAsf; Outlook Stable; and
AUD32.3m Class B (ISIN AU3FN0001855) notes affirmed at 'BBBsf'; Outlook Stable.

Medallion Trust Series 2011-1:
AUD615.0m Class A1 (ISIN AU3FN0012944) notes affirmed at 'AAAsf'; Outlook Stable
AUD525.0m Class A2 (ISIN AU3CB0173953) notes affirmed at 'AAAsf'; Outlook Stable
AUD92.2m Class AB (ISIN AU3FN0012951) notes affirmed at 'AAAsf'; Outlook Stable; and
AUD46.1m Class AC (ISIN AU3FN0012969) notes affirmed at 'AAAsf'; Outlook Stable.

Medallion Trust Series 2012-1:
AUD524.4m Class A (ISIN AU3FN0016176) notes affirmed at 'AAAsf'; Outlook Stable; and
AUD60.0m Class B (ISIN AU3FN0016184) notes upgraded to 'AA+sf' from 'AAsf'; Outlook Stable.

Medallion Trust Series 2013-1:
AUD518.4m Class A1 (ISIN AU3FN0018024) notes affirmed at 'AAAsf'; Outlook Stable
AUD650.0m Class A2 (ISIN AU3FN0018032) notes affirmed at 'AAAsf'; Outlook Stable
AUD250.0m Class A3 (ISIN AU3CB0205789) notes affirmed at 'AAAsf'; Outlook Stable; and
AUD153.0m Class B (ISIN AU3FN0018040) notes affirmed at 'AAsf'; Outlook Stable.

Medallion Trust Series 2013-2:
AUD1,309.3m Class A1 (ISIN AU3FN0019972) notes affirmed at 'AAAsf'; Outlook Stable;
AUD372.2m Class A2 (ISIN AU3FN0019980) notes affirmed at 'AAAsf'; Outlook Stable;
AUD400.0m Class A3 (ISIN AU3CB0212702) notes affirmed at 'AAAsf'; Outlook Stable; and
AUD200.0m Class B (ISIN AU3FN0019998) notes upgraded to 'AAsf' from 'AA-sf'; Outlook Stable.

Medallion Trust Series 2014-1:
AUD1,086.1m Class A1 (ISIN AU3FN0022109) notes affirmed at 'AAAsf'; Outlook Stable;
AUD497.4m Class A2 (ISIN AU3FN0022117) notes affirmed at 'AAAsf'; Outlook Stable;
AUD300.0m Class A3 (ISIN AU3CB0218733) notes affirmed at 'AAAsf'; Outlook Stable; and
AUD0.0m Class A3-R notes affirmed at 'AAAsf'; Outlook Stable; and
AUD150.7m Class B (ISIN AU3FN0022208) notes upgraded to 'AA-sf', from 'A+sf'; Outlook Stable.

Medallion Trust Series 2014-1P:
AUD419.1m Class A1 (ISIN AU3FN0023801) notes affirmed at 'AAAsf'; Outlook Stable, and
AUD33.0m Class B (ISIN AU3FN0023099) notes affirmed at 'Asf'; Outlook Stable.

Medallion Trust Series 2014-2:
AUD3,438.9m Class A1 (ISIN AU3FN0024501) notes affirmed at 'AAAsf'; Outlook Stable, and
AUD240.0m Class B (ISIN AU3FN0024519) notes affirmed at 'A+sf'; Outlook Stable.

Fitch's initial key rating drivers and rating sensitivities are further discussed within each transaction's new issue report, with the exception of the new issue reports for Medallion Trust Series 2006-1G and 2007-1G, which do not include rating sensitivities. All reports are available at www.fitchratings.com.

A comparison of the transactions' 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 given under Related Research below.