Clik here to view.
49% low-doc loans in this one
RPT-Fitch downgrades Seiza Augustus Series 2007-1 class D notes
http://www.reuters.com/article/fitch-downgrades-seiza-augustus-series-idUSFit65718920130510
May 10 (The following statement was released by the rating agency)
Fitch Ratings has downgraded Seiza Augustus Series 2007-1 Trust's class D notes and affirmed the class C notes.
The notes were issued by Australian Executor Trustees Limited as trustee of the. The transaction closed in April 2007, and is a securitisation of small balance commercialImage may be NSFW.
Clik here to view.
and residential mortgages originated by Seiza Mortgage Company Pty Limited (Seiza). The rating actions are as listed below:
AUD3.13m Class C (ISIN AU3FN0002465) affirmed at 'Asf'; Outlook Stable
AUD19.02m Class D (ISIN AU3FN0002463) downgraded to 'CCCsf' from 'BBsf';
Recovery Estimate of 90% assigned
Key Rating Drivers
The downgrade of the class D notes reflects Fitch's view that a default on the notes is a possibility given high expenses, low recoveries and low prepayment rates. The transaction has paid down from initial liabilities of AUD404.7m to approximately AUD30.6m after charge-offs as of April 2013, when the pool comprised 81 residential and commercial mortgages. Low-documentation loans represented 49% of the pool.
The affirmation of the rating of the class C notes reflects Fitch's view that the available credit enhancementImage may be NSFW.
Clik here to view. levels are sufficient to support the notes' current ratings, and that the notes will not be impacted by higher-than-expected expenses and low recoveries.
As of the April 2013 payment date, the total cumulative losses amounted to AUD31.2m, of which AUD17.1m has
been reimbursed via excess spread and income from liquidation proceeds. A unique feature of this transaction is the full charge-off to the notes that are greater than 300 days in arrears, as a result of which the unrated class F and G notes have been charged-off.
Total charge-offs have remained high since late 2011. As of April 2013, charge-offs against the class G notes totalled AUD10.34m, and against the class F note totalled AUD3.98m, just short of the total notes' balance of AUD4.05m. As of April 2013, three loans were in arrears by more than 90 days. These have not yet been charged-off and accounted for 7.32% of the pool.
As of April 2013, outstanding principal draws totalled AUD286,395. Since December 2012, the transaction has experienced an increase in principal draws as expenses and coupon payments were higher than the income received from the performing assets. Over the 12 months to April 2013, the transaction has experienced significant litigation costs, at an annualised rate of approximately 3%, due to the high level of properties in possessions and arrears.
The excess and loss provision reserves have been fully used. The liquidity facility amounted to AUD13m at end-March 2013, representing 42% of the collateral pool.
Rating Sensitivities
The current level of credit enhancement available to the class C notes provides a significant protection to foreseeable adverse scenarios.
Recoveries from current properties in possession are expected to reduce the level of charge-offs in the coming months, and the rating of class D notes is sensitive to whether recoveries will be above or below historical levels. Since closing, defaulted loans and realised losses amounted to AUD64.9m and AUD25.1m, respectively, reflecting a 38.8% loss severity.
The rating on the class D notes will also be influenced by the level of expenses, particularly arrears litigation costs. If future expenses are below the levels reported in the 12 months to April 2013 investment payment date, and principal draws are cured, the rating on Class D notes may be upgraded.
The rating on the class D notes is also sensitive to prepayments. Any prepayment would benefit the class D notes as they would be repaid before any outstanding principal draw would increase, in turn impacting the transaction's yield.
As the mortgage portfolio decreases, the risk of principal losses resulting from the default of large loans and the risk of constant negative carry become a relevant driver for Fitch's analysisImage may be NSFW.
Clik here to view.. A cash flow analysis was performed on the transaction, stressing a combination of interest rates, defaults, default timing recovery timing, prepayment rates, and expenses