Australian lenders Bendigo and Adelaide Bank will be the originators and servicers behind the AUD$500 million ($362.6 million) residential mortgage-backed securities deal, through the TORRENS Series 2021-2 Trust.
Prime residential mortgages comprise the collateral pool, primarily, with credit enhancement levels to the class A notes equal to about 8%. That level exceeds the 4.5% Moody’s Individual Loan Analysis loss rate that the rating agency set for distress in the event of a severe recessionary scenario, according to Moody’s Investors Service.
The portfolio of 1,992 loans has a weighted average (WA) seasoning of 30.5 months, and investment loans comprise 14.1% of the securitized portfolio. The level of investment loans is below the Australian mortgage market average of 32.1% as of the end of March 2021.
Despite the prime collateral and credit enhancement, Moody’s notes potential credit challenges on the deal. The absolute amount of credit enhancement that will be available to the senior tranches through out the lifetime of the deal is expected to decrease. All notes are subject to pro-rata amortization after of all notes after certain serial pay-down conditions are met. The senior notes could be vulnerable to the risk of loss in the tail end of the transaction.
TORENS has a consolidated average loan balance of $268,693 Loans with scheduled loan-to-value (LTV) between 75% and 80% comprise about 23.7% of the pools. Also, the collateral has a 10.3% of loans with scheduled LTV of over 80%.
The underlying loans in the portfolio were underwritten on a full documentation standard, and none of the borrowers have a credit profile with adverse events, according to Moody’s.
While none of the underlying loans have a delinquency between 1-30 days, there are low levels of delinquencies for other durations through out the Bendigo securitization history. As of the end of June 2021, for instance the pool’s WA 30+ days delinquency rate on BEN outstanding RMBS programs was 1.54%.
Moody’s expects to assign ‘Aaa’ ratings to the AUD$460 class A notes, which have a legal final maturity of April 2053.
