OREANDA-NEWS. Fitch Ratings has affirmed the ratings of HBS Trust 2014-1's Class A and Class AB residential mortgage-backed floating rate notes. The transaction is a securitisation of first-ranking Australian residential mortgages originated by Heritage Bank Limited (BBB+/Stable). The rating actions are as follows:

AUD 218.3m Class A (ISIN AU3FN0022299) notes affirmed at 'AAAsf'; Outlook Stable; and
AUD 20.0m Class AB (ISIN AU3FN0022307) notes affirmed at 'AAAsf'; Outlook Stable.

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 expectations.

The default model was not run for this rating action as a review of pre-determined performance triggers indicates that the transactions display stable asset performance. This is in line with Fitch's APAC Residential Mortgage Criteria.

At November 2015, 30+ day arrears made up 0.50% of the pool, well below Fitch's Dinkum Index of 1.12%. No defaults or losses have been recorded since issuance.

The pool is geographically concentrated in Queensland, with 58.2% of collateral located in the state, which has been taken into account in our analysis. The reported weighted average loan/value ratio was 55.8%.

All loans in the underlying portfolios are covered by lenders' mortgage insurance (LMI), with the majority of policies (99.88%) being provided by QBE Lenders Mortgage Insurance Pty Limited (Insurer Financial Strength (IFS) Rating: AA-/Stable). The remaining loans are covered by Genworth Financial Mortgage Insurance Pty Ltd (IFS Rating: A+/Stable) and Housing Loans Insurance Corporation (HLIC, backed by the Commonwealth Bank of Australia, rated: AAA/Stable).

RATING SENSITIVITIES
Sequential pay-down has increased credit enhancement for the senior notes with the 'AAAsf' rated notes able to withstand multiples of the latest reported arrears. Fitch does not expect the ratings to be affected due to any foreseeable change in performance. The ratings of the senior notes are independent of downgrades to the LMI provider's ratings.

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

DATA ADEQUACY
Fitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by Heritage Bank Limited 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 given under Related Research below.