International Structured Finance
Pre-Sale Report
Australia
RAMS Mortgage Securities Trust in respect of
Series 2006-1
RMBS / Australia
This pre-sale report addresses the structure
and characteristics of the proposed transaction
based on the information provided to Moody’s
as of 30 August 2006. Investors should be
aware that certain issues concerning this
transaction have yet to be finalised. Upon
conclusive review of all documents and legal
information as wel las any subsequent changes
in information, Moody’s will endeavour to
assign definitive ratings to this transaction. The
definitive ratings may differ from the
provisional ratings set forth in this report.
Moody’s will disseminate the assignment of
definitive ratings through its Client Service
Desk. This report does not constitute an offer
to sell or a solicitation of an offer to buy any
securities, and it may not be used or circulated
in connection with any such offer or
solicitation.
PROVISIONAL (P) RATINGS
Class
Rating
Amount (million)*
A
AB
B
(P)Aaa
(P)Aa1
(P)Aa2
AUD [714]
AUD [18]
AUD [18]
Total
% of
Notes
[95.20]
[2.40]
[2.40]
Legal Final
Maturity
October 2038
October 2038
October 2038
Coupon
1BBSW + [•]%
1BBSW + [•]%
1BBSW + [•]%
AUD [750]
* These are minimum amounts that may vary subject to the same subordination percentage
The ratings address the expected loss posed to investors by the legal final maturity.In Moody’s opinion the
structure allows for timely payment of interest and ultimate payment of principal at par on or before the rated
final legal maturity date. Moody’s ratings address only the credit risks associated with the transaction. Other noncredit risks have not been addressed, but may have a significant effect on yield to investors.
Estimated Closing Date
[12 October 2006]
Lead Analyst
Arthur Karabatsos
Assistant Vice President – Analyst
+61 2 9270-8160
Arthur.Karabatsos@moodys.com
OPINION
Strengths of the Transaction
−
All loans are insured under a primary lender’s mortgage insurance (LMI) policy
(with minimum Insurance Finance Strength Rating of Aa2) covering 100% of
principal and interest (subject to the terms of the insurance policy) and the
inclusion of timely payment cover for 12 months.
−
Class AB Notes and Class B Notes provide more than the minimum required
credit enhancement for the Class A Notes. The credit enhancement provided by
the Class AB Notes and Class B Notes is sufficient for the Class A Notes to
withstand an immediate three notch downgrade of all mortgages insurers.
Backup Analyst
Tim See
Vice President – Senior Credit Officer
+61 2 9270-8104
Tim.See@moodys.com
Investor Liaison
Sally Ritter
Sales Associate
+61 2 9270-8156
Sally.Ritter@moodys.com
Weaknesses and Mitigants
−
Approximately 32.68% of the loans in the portfolio are stated income loans where
the lender relies on the borrower to self certify their income (LoDoc) and
approximately 28.69% of the loans in the portfolio are loans where the lender
relies on the borrower to self certify their ability to service the loan (NoDoc).
These loans are more likely to demonstrate higher arrears than a comparable
fully verified income loan (though still considerably less than a non-conforming
loan). The risk is mitigated by making such loans subject to lower maximum loan
to value ratios and loan sizes. Moody’s credit enhancement requirement
accounts for the additional risk associated with such loans.
−
The rating of the Class B Notes is highly correlated to the insurance financial
strength rating of the mortgage insurers.
Client Service Desk
Sydney: +61 2 9270-8100
SydneyClientDesk@moodys.com
Monitoring
monitor.sydney@moodys.com
Website
www.moodys.com
22 September 2006
STRUCTURE SUMMARY
Issuer:
Structure Type:
Seller:
Originator:
Servicer:
Delegated Servicer:
Document Custodian:
Trust Manager:
Standby Manager:
Security Trustee:
Interest Payments:
Principal Payments:
Fixed Swap Providers:
Mortgage Insurers:
Credit Enhancement/Reserves:
Liquidity Support:
Registered Note Registrar:
Registered Note Paying Agent:
Joint Lead Managers:
RAMS Mortgage Securities Pty Limited as trustee of RAMS Mortgage Securities Trust in
respect of Series 2006-1
Notes backed by a pool of mortgage receivables which have been sold to a special
purpose vehicle incorporated in Australia.
RAMS Mortgage Corporation Limited
RAMS Home Loans Pty Limited
Receivables Servicing Pty Ltd
Unisys Credit Services Pty Ltd
JP Morgan Services Pty Limited
RAMS Home Loans Pty Limited
JP Morgan Trust Australia Ltd
JP Morgan Trust Australia Ltd
Monthly in arrears on the 14th (or next banking day) of each month.
On the 14th (or next banking day) of each month.
National Australia Bank Limited (Aa3/P-1)
Housing Loans Insurance Corporation (HLIC) (IFSR Aaa)
Genworth Financial Mortgage Insurance Pty Limited (Genworth) (IFSR Aa2)
PMI Mortgage Insurance Limited (PMI) (IFSR Aa2)
Note Subordination, Mortgage Insurance, Excess Spread.
0.50% Cash Deposit
JP Morgan Trust Australia Ltd
JP Morgan Trust Australia Ltd
Royal Bank of Scotland PLC
National Australia Bank Limited
COLLATERAL SUMMARY (see Tables 1 & 2for more details)
Underwriting Type
Portfolio Size:
Loans Count:
WA Original LTV:
WA Scheduled LTV:
WA Current LTV:
WA Seasoning (months):
Mortgage Insurance:
Loan Repayment Schedule:
Geographic Diversity:
Pool Cut-off Date:
2 • Moody’s Investors Service
38.64% fully verified loans, 32.68% LowDoc loans, 28.69% NoDoc loans
743,733,958
3,393
72.14%
71.98%
69.70%
4.7
HLIC (IFSR Aaa)
0.14%
Genworth (IFSR Aa2)
31.41%
PMI (IFSR Aa2)
68.45%
Principal & Interest
46.54%
Interest Only ≤ 5 Years
45.14%
Interest Only > 5 Years
8.32%
Australian Capital Territory
1.73%
New South Wales
28.28%
Northern Territory
0.32%
Queensland
21.49%
South Australia
1.69%
Tasmania
0.49%
Victoria
18.44%
Western Australia
27.56%
30 August 2006
RAMS Mortgage Securities Trust in respect of Series 2006-1
TRANSACTION SUMMARY
Rating Opinion
(P)Aaa Class A
Moody's (P)Aaa rating on the Class A Notes is based on several factors:
−
The level of subordination provided for the Class A Notes by the Class AB Notes
and Class B Notes is equal to approximately 4.80% of the total notes issued;
−
All loans are covered by a mortgage insurance policy covering default losses equal
to 100% of the principal and accrued interest of each loan and reasonable expenses
involved in enforcing the mortgage. The policies are issued by Housing Loan
Insurance Corporation (IFSR Aaa), Genworth Financial Mortgage Insurance Pty
Limited (IFSR Aa2) and PMI Mortgage Insurance Limited (IFSR Aa2);
−
The availability of excess interest income to meet principal chargeoffs (if any);
−
The liquidity protection made available to meet interest shortfalls through a
combination of the ability of the Trustee to use principal collections, the Cash
Deposit equal to 0.50% of Notes outstanding and the 12 months timely payment
cover provided respectively by each mortgage insurer.
−
The interest rate swap contract the Trustee enters into with National Australia Bank
Limited (Aa3/P-1) to hedge the interest rate mismatch between the Trustee's
floating rate obligations to noteholders and the interest rates on the fixed rate
mortgage loans, together with the threshold rate mechanism that requires the
Trustee to ensure that interest rates on the underlying mortgages are set at a rate
sufficient to meet the Trust’s obligations (taking into account swap payments);
−
The protection offered to noteholders by a charge over the Trust assets granted to a
Security Trustee on their behalf; and
−
The ability of RAMS Home Loans Pty Ltd and Receivables Servicing Pty Ltd to
perform their obligations relating to the management and servicing of Series
2006 1.
(P)Aa1 Class AB
The (P) Aa1 rating of the Class AB Notes is primarily based on the factors above, the
level of subordination provided to the Class AB Notes by the Class B Notes (2.40%) and
Moody’s analysis of the expected loss relative to the size of the tranche of Class AB
Notes. The rating of the Class AB Notes is correlated to the rating of the mortgage
insurers.
(P)Aa2 Class B
The (P)Aa2 rating of the Class B subordinated Notes is also based on the same factors
above and Moody's analysis of the expected loss of the Class B Notes. The rating of the
Class B Notes is highly correlated to the ratings of the mortgage insurers.
The ratings address the expected loss posed to investors by the legal final maturity. The
structure allows for timely payment of interest and ultimate payment of principal with
respect to the Class A Notes, Class AB Notes and the Class B Notes by the legal final
maturity.
Moody’s issues provisional ratings in advance of the final sale of securities and these
ratings reflect Moody’s preliminary credit opinion regarding the transaction. Upon a
conclusive review of the final versions of all the documents and legal opinions,
Moody’s will endeavour to assign a definitive rating to the transaction. A definitive
rating may differ from a provisional rating.
RAMS Mortgage Securities Trust in respect of Series 2006-1
Moody’s Investors Service • 3
STRUCTURAL AND LEGAL ASPECTS
Chart 1:
Structure diagram, Trust Level
Trustee
RAMS Mortgage Securities Pty Limited (RMS)
as trustee of
RAMS Mortgage Securities Trust
Group 1
Group 2
Group 3
Group 4
Group 5
Series 2006-1
Excess Spread
Future
Groups
Future Series
Chart 2:
Structure diagram, Series Level
Delegated Servicer
Unisys Credit Services
Pty Ltd
Standby Manager
JP Morgan Trust
Australia Ltd
Trust Manager
RAMS Home Loans Pty
Limited (RHL)
Servicer
Receivables Servicing
Pty Ltd
Document Custodian
JP Morgan Trust
Australia Ltd
Standby Trustee
Security Trustee
JP Morgan Trust
Australia Ltd
JP Morgan Trust
Australia Ltd
Floating Charge
Trustee
RAMS Mortgage Securities
Pty Limited (RMS)
Reallocation of beneficial interest
Various warehouse series
Note proceeds used to
acquire loans
Notes
Issuer & Trustee
RAMS Mortgage Securities Pty Limited (RMS)
as trustee of
RAMS Mortgage Securities Trust
in respect of Series 2006-1
Investors
Note proceeds
Loans. Originated in the name of
RAMS Mortgage Corporation
Limited (RMC)
Originator
RAMS Home Loans Pty
Limited (RHL)
Liquidity
0.50% Cash Deposit
Mortgage Insurance
Genworth, PMI & HLIC
Interest Rate Swap
NAB
Structural Overview
Single trust
RAMS Mortgage Securities Trust is a single trust that has been established under the
Trust Deed entered into between the Security Trustee, RAMS Mortgage Securities Pty
Limited, Registered Note Registrar and Registered Note Paying Agent on December 8,
2004.
Multiple series
An unlimited number of separate “series” may be established within the RAMS Mortgage
Securities Trust by the execution of a Deed of Charge and Series Supplement for each
series. Each series is a separate and distinct security structure enabling it to issue notes
secured by the specific assets allocated to the series. With the exception of excess
spread the assets of one series are not available to meet the obligations of any other
series. Legal opinion has been provided to support the segregation of the assets of each
series from creditors of other series.
Groups
When established, each a series of the trust is designated to a particular group. The only
purpose of the group is to allow for the reallocation of excess spread from one series to
another within the group to reinstate losses. Currently Series 2006-1 is the only series in
Group 5.
4 • Moody’s Investors Service
RAMS Mortgage Securities Trust in respect of Series 2006-1
Sale Mechanism / Title Perfection / Document Custody
Warehouses
All loans have been originated by RAMS Home Loans Pty Limited (RHL) and written in the
name of RAMS Mortgage Corporation Limited (RMC). Post origination loans are equitably
assigned by RMC (lender of record) to one of various series within the RAMS Mortgage
Securities Trust of which RAMS Mortgage Securities Pty Limited (RMS) is trustee.
Equitable assignment
At closing, RMC may either equitably assign such loans to RMS in respect of Series
2006-1 or, if the loans are held in respect of another Series, RMS will reallocate its
beneficial interest in the loans to Series 2006-1.
Title perfection
RMC is a bankruptcy remote special purpose vehicle and not a subsidiary of any RAMS
company. RMC will continue to maintain legal ownership of the loans until the occurrence of a
title perfection event which amongst other things includes the insolvency of RMC, upon which
RMS is required to take the necessary steps to obtain legal title of the loans from RMC
(perfecting its legal title). The Security Trustee will hold irrevocable powers of attorney (granted
by RMC the lender of record), entitling it to perfect legal title following a title perfection event.
Independent document custodian
The Security Trustee also acts as custodian of all mortgage security documents (which
facilitates the ability to perfect title if necessary).
Based on these factors Moody’s believes title perfection risk is adequately mitigated
Security Trust Deed
Security Arrangement
The Trustee will grant to the Security Trustee, for the benefit of the noteholders and
other secured creditors including the providers of support facilities, a first ranking
floating charge over all of the Series 2006-1 assets. The floating charge will become a
fixed charge if certain events occur, including the insolvency of the Trustee in its capacity
as Trustee of the Trust in respect of Series 2006-1, and a failure to pay secured
creditors in full within a specified period. The transaction documents also set out the
enforcement procedures of the charge that the Security Trustee is required to follow and
the applicable priorities in relation to the enforcement proceeds.
Payment Structure Of The Notes
RAMS Mortgage Services Pty Limited as Trustee of RAMS Mortgage Securities Trust in
respect of Series 2006-1 will issue three classes of Notes:
−
Class A Notes;
−
Class AB Notes; and
−
Class B Notes.
All notes are denominated in Australian Dollars.
Liquidity Notes
To assist in funding principal redraws and further advances on mortgages, Series 2006-1
may, as needed, issue Liquidity Notes (denominated in Australian Dollars), provided
Moody’s confirms that the existing ratings of the Notes outstanding will not be adversely
affected.
On each monthly payment date the Class A Notes, Class AB Notes and Class B Notes
will receive a floating rate of interest at a respective margin over one month AUD-BBSW.
Margin step up
The notes may be redeemed at the earlier of the Call Date (October 2011) or when the
principal outstanding on all notes is less than 20% of there initial balance. If the notes
are not redeemed the margin on the Class A Notes will increase by a further 0.25% and
the margins on the Class AB Notes and Class B Notes will double.
Excess spread shared between
series within a group
Distributions of excess spread occur on a monthly payment date and may be made
available to other series in the group (if any) to meet charge off and carry over charge
offs (if any).
Principal Payments
On each monthly payment date total available principal collections from the mortgage
pool will be allocated in the following priority:
1.
Repayment of Liquidity Notes (if required);
2.
Retain in collection account anticipated Redraws and Further Advances;
3.
Repayment of Class A Notes;
4.
Repayment of Class AB Notes; and
5.
Repayment of Class B Notes.
RAMS Mortgage Securities Trust in respect of Series 2006-1
Moody’s Investors Service • 5
No step down
Class AB Notes will receive principal payments only after the Class A Notes have been
redeemed in full. Class B Notes will receive principal payments only after the Class AB
Notes have been redeemed in full. The Class A Notes are therefore protected from credit
losses to the full extent of the initial value of the Class AB Notes and Class B Notes.
Likewise, the Class AB Notes are protected from credit losses to the full extent of the
initial value of the Class B Notes.
Pre Funding
If on the Closing Date, the purchase price of the loans is less than the bond proceeds,
then the surplus bond proceeds will be retained in a pre-funding account held with a P-1
rated bank, and used to purchase further eligible loans during the pre-funding period
(from Closing Date till the first payment date). The purchase of further loans is subject to
ratings affirmation by Moody’s.
The amount of surplus bond proceeds held in the pre-funding account may not exceed
25% of initial amount of notes issued.
Any monies held in the pre-funding account not used to purchase mortgages will be
distributed as principal collections at the end of the pre-funding period (first payment
date).
Credit Support
Lenders Mortgage Insurance
Lender’s Mortgage Insurance
provides first layer of external
support
Upon default of a borrower, if there is unpaid principal and interest outstanding - after
applying proceeds from the realisation of the underlying residential property security - the
first layer of external protection is Lenders Mortgage Insurance (LMI).
Mortgage insurance policies insure the Trustee against default losses equal to 100% of
the principal amount of each mortgage loan, together with loss of interest and
reasonable expenses involved in enforcing the mortgage. The insurers and the respective
proportion of loans insured are as follows:
−
0.14% Housing Loan Insurance Corporation (IFSR Aaa);
−
31.41% Genworth Financial Mortgage Insurance Pty Limited (IFSR Aa2); and
−
68.45% PMI Mortgage Insurance Ltd (IFSR Aa2).
Mortgage insurance policies are not guarantees and claims are subject to the terms of
the policy. Exclusions under the LMI policies include damage to the security property not
covered by building insurance.
Application of Excess Spread
Threshold Rate
The threshold rate mechanism requires the Servicer to set the weighted average interest
rate not less than the Threshold Rate. The Threshold Rate is the rate required to cover
the Trust’s obligations including interest on the notes, fees and expenses.
On each monthly payment date, the Trustee must apply any excess income available to
all principal charge-offs related to Series 2006-1, to the extent that excess income is
available.
Subordination
The rights of the Class B Notes to receive principal payments are subordinated to the
Class AB Notes, which are subordinated to the Class A Notes.
To the extent that there are losses not covered by mortgage insurance or excess spread,
these losses are first allocated to the Class B Notes. To the extent that the Class B
Notes are fully charged off, any further losses are applied to the Class AB Notes.
To the extent the Class AB Notes are fully charged off, any further losses are allocated to
the Class A Notes.
6 • Moody’s Investors Service
RAMS Mortgage Securities Trust in respect of Series 2006-1
Hedging
Fixed Rate Swap
Hedging strategy supports ability
to generate excess spread
The Trustee will enter into a fixed interest rate swap with National Australia Bank
Limited (NAB) (Aa3/P-1) to hedge any mismatch between the rates of interest received
on any fixed rate loans and the floating rate obligations of the trust including interest
paid on the Notes.
If NAB is downgraded to below A2 or P-1, then it must either be replaced by a suitably
rated swap provider, or post collateral in an amount sufficient to preclude a ratings
downgrade of the Notes.
Threshold Rate
The Trustee is also required to ensure that the weighted average interest rate on the
mortgage pool is not less than the amount required to meet the payment obligations of
the Trust.
Liquidity Support
There are three sources of liquidity available to cover income shortfalls. These are the
use of principal collections, the Cash Deposit and Timely Payment Cover under the LMI.
Use of principal
In the first instance the Trustee is able to use mortgage principal receipts (Principal
Draw) to fund any income shortfalls.
0.50% Cash Deposit
At closing 0.50% of the proceeds of the notes will be invested in liquid authorised
investments (the Cash Deposit) to be used to meet any shortfall where the Interest
Collections, together with any Principal Draw, are not sufficient to meet the Required
Payments in full on a Payment Date.
Any drawing from the Cash Deposit must be subsequently replenished from excess
income and principal collections. The Cash Deposit must be maintained at 0.50% of
principal outstanding of the notes, any amounts released will be included in total
available principal.
Timely payment cover
The series also has the benefit of timely interest cover on all loans for a minimum of 12
months provided by the respective mortgage insurers.
COLLATERAL
RAMS Home Loans Pty Limited (RHL) underwrites all loans originated and makes certain
representations and warranties about the housing loans sold into the series. All housing
loans must conform with RAMS’ underwriting procedures and must meet the eligibility
criteria under the transaction documents before being sold into the series.
The eligibility criteria include the following:
61% limited documentation loans
−
The mortgage is secured by a first mortgage over Australian residential property; and
−
No loans are currently more than 30 days in arrears.
RAMS provides limited documentation loan products (approximately 61% of the portfolio)
for self employed borrowers where the normal requirements of income verification is
relaxed subject to lower loan to value ratio and maximum loan size tests being met.
Credit checks are conducted on all borrowers.
RHL uses two methods of assessing borrowers’ serviceability for its limited
documentation loan products, as set out below:
LoDoc
The loan applicants self-certify their income. RHL then applies normal serviceability tests
to determine whether this income supports the proposed loan payments and also checks
that the applicant’s assets and liabilities statement supports the income disclosed by
the applicant. Approximately 32.68% of the portfolio are originated using this
underwriting approach. Non self employed borrowers may also qualify for a LoDoc loan
subject to maximum LTV of 70%.
NoDoc
The loan applicants self certify their ability to service the proposed debt. There is no
income verification in relation to these loans (though different maximum loans sizes and
LTV limits apply). Approximately 28.69% of the portfolio are originated according to this
underwriting approach.
RAMS Mortgage Securities Trust in respect of Series 2006-1
Moody’s Investors Service • 7
The maximum loan to value ratios and loan size tests which apply to the various loan
types are set out below:
Eligibility Criteria
Fully Verified
Loans
LoDoc
NoDoc
Maximum Loan to Value ratio
Maximum Loan Size*
95%
$2,000,000
80%
$1,000,000
80%
$800,000
(or $1,000,000
subject to max LTV 70%)
* Maximum loan size is further subject to geographical limitations.
The pool of eligible mortgages sold to the Trust includes the following loan features:
−
fixed rate and variable rate amortising mortgage loans, where the borrower can
choose to fix mortgage rates for a term of no more than five years at a time; and
−
loans with an interest only period of up to ten years, after which the loan must
convert into a principal and interest amortising loan.
Further Advances
The trustee may subject to certain conditions, use principal collections to fund further
advances to borrowers which represents an increase in the original loan amount.
Further advances are subject to the normal credit assessment including a revaluation of
security property and must meet the following conditions:
−
borrower must not have been in arrears in the previous 6 months;
−
the further weighted average Loan to Value Ratio of the pool must not increase by
more than 2% from the previous distribution date;
−
the aggregate of all further advances made in any year is limited to 3% of the
invested amount of the bonds as at the most recent anniversary of the closing date;
−
total arrears greater than 60 days must not exceed 2%; and
−
there must be no unreimbursed charge-offs on the notes.
Moody’s conducted its preliminary credit analysis on the loan pool as of August 30,
2006. Further details are set out in Table 1 (Mortgage Pool Summary) and Table 2
(Detailed Mortgage Pool Summary).
Characteristics of the securitised
pool
Moody’s believes that the pool has a number of positive and negative characteristics,
which impacts on Moody’s credit enhancement requirements.
Positive characteristics include the following:
−
approximately 68% of the portfolio properties are located in metropolitan areas,
based on Moody’s classification; and
−
approximately 85% of the security properties are detached houses.
Negative characteristics include the following:
−
approximately 32.68% and 28.69% of the portfolio comprises of LoDoc and No Doc
loans respectively; and
−
Approximately 27.5% of the mortgage pool balance represents loans which are in
Western Australia. Whilst the Western Australian economy is currently experiencing
strong growth and strong house price appreciation on the back of strong commodity
prices, the regional economy is less diverse and is therefore also at risk of boom/bust
cycles
ORIGINATOR, SERVICER AND OPERATIONS REVIEW
Program Servicing and management
RAMS Background
In September 1991 RAMS Home Loans Pty Limited (“RHL”) was incorporated and
commenced operations acting as a third party funder, sourcing its residential mortgage
loans through a network of up to 20 originators.
In 1994, RHL established its own origination business and established its corporate
funding vehicle, RAMS Mortgage Corporation Limited (“RMC”) which executed its
inaugural securitisation issue in 1994.
8 • Moody’s Investors Service
RAMS Mortgage Securities Trust in respect of Series 2006-1
In November 2002, RHL established another funding vehicle, RAMS Mortgage Securities
Pty Limited, which acts as the trustee of separate trusts established from time to time.
RHL commenced two major outsourcing projects in 2002. RHL is private company.
Issuance to date
To date, the RAMS issuance program has issued 14 prime RMBS transactions (A$12.4
billion).
The Trust Manager (RAMS Home Loans Pty Limited) provides the administrative support
and automated systems required to perform the administration, supervision and
management of the trust. The responsibilities involved include the coordination of
funding requirements for the RAMS program and the establishment of guidelines
governing mortgages approved for the program.
Servicing
Receivables Servicing Pty Limited (a company within the RAMS group companies) is
responsible for performing the day to day duties of servicing the loans including amongst
other things administering collections for loans, compliance with applicable laws, setting
interest rates and generating periodic reports.
Delegated servicer
Under the terms of the Master Servicer Deed, the Servicer may delegate some of its
servicing functions to a third-party provider. Since November 2002 the Servicer has
delegated all of its servicing functions to Unisys Credit Services Pty Limited. The Servicer
will remain liable for servicing the Loan Portfolio and the acts and omissions of any
delegate, including Unisys Credit Services Pty Limited.
Backup servicer
The Security Trustee acts as Backup Servicer in the event the Servicer is no longer able
to perform its obligations.
Collection Account
From closing, the Servicer will collect all monies due under the mortgage loans and is
required to be deposit these monies into Series 2006-1 collection account within 1
business day of receipt. The collection account must be held with a P-1 rated bank.
MOODY’S ANALYSIS
Rating Analysis
LTV is the prime determinant of
mortgage loan default
Moody’s applies an expected loss analysis when quantifying the credit risks for this loan
portfolio. Moody's approach is based on historical evidence that the prime determinant
of mortgage loan default in the Australian market is LTV. Historical data indicates that
the incidence of default rises sharply and disproportionately to relative incremental
increases in LTV.
A similar relationship between LTV and severity of loss exists with the substantially
higher average severity of loss experienced at higher LTV levels.
Moody’s has derived benchmark credit enhancement levels to reflect differences in LTV.
Using the weighted average LTV for any particular pool (calculated on a loan by loan
basis), Moody’s then makes further adjustments for specific risk attributes including
Limited Income Verification, High Value Security Properties, Non-owner Occupied
Properties, etc.
The total gross credit enhancement provided to the senior notes therefore derives from
the credit enhancement requirements of the benchmark pool as well as the penalties
and benefits assigned by Moody’s for deviations from this benchmark. Moody’s
methodology for rating Australian RMBS can be found in “AU-MILAN, The Scoring Model
Revisited,” August 2003. To provide for concentration risk given that the portfolio
comprises 61% limited documentation loans, Moody’s has allowed for additional positive
default correlation in a stress scenario.
Net Credit Enhancement is More Than Sufficient to Support (P)Aaa Ratings
When analysing the adequacy of the net credit enhancement available to the rated notes,
Moody's assesses the loan characteristics, the origination and underwriting practices,
and the insurance financial strength ratings of the mortgage insurers.
(P)Aaa Class A
The gross level of subordination to support the (P)Aaa ratings assigned to the senior
notes would be approximately 9.25%, assuming the pool was not insured.
After mortgage insurance the 4.80% credit enhancement provided to support the (P)Aaa
ratings assigned to the Class A senior notes is higher than the Moody’s required credit
enhancement of 1.85%.
RAMS Mortgage Securities Trust in respect of Series 2006-1
Moody’s Investors Service • 9
3 notch downgrade
The extra credit enhancement provided would be sufficient to withstand an immediate
three notch downgrade for all mortgage insurers supporting the transaction.
(For details of Moody's assessment of the impact of mortgage insurance on the level of
subordination, please refer to Moody's Special Report, "The impact of Mortgage
Insurance on the Subordination Level Of Australian MBS, May 2000").
The difference between the minimum required subordination 1.85% and the total subordination
provided to the Class A Notes of 4.80%, of which 2.40% is represented by the Class AB Notes.
These Notes effectively bear mortgage insurance downgrade risk that would otherwise be
borne by the Class A Notes as well as the risk of any credit losses not covered by mortgage
insurance policies once the Class B Notes have been charged off in full
(P)Aa2 Class AB
The (P)Aa1 rating of the Class AB Notes reflects the higher expected loss of this tranche
relative to the Class A Notes, taking into consideration the subordination to the Class A
Notes, together with the benefit of the 2.40% subordination provided by the Class B
Notes, the mortgage insurance policies and excess spread. The rating of the Class AB
Notes is more correlated to the rating of the mortgage insurers than the Class A Notes,
but less so than the Class B Notes.
(P)Aa2 Class B
The (P)Aa2 ratings of the Class B Notes reflects Moody’s view of the expected loss of
this tranche, taking into consideration the benefit of mortgage insurance policies and
excess spread. The rating of the Class B Notes is highly correlated to the ratings of the
mortgage insurers.
Rated to legal final
The ratings address the expected loss posed to investors by legal final maturity. The
structure allows for timely payment of interest and ultimate payment of principal by the
final legal maturity.
RATING SENSITIVITIES AND MONITORING
Ongoing monitoring
Moody’s will monitor the transaction on an ongoing basis to ensure that its transaction
continues to perform in the manner expected, including checking all supporting ratings
and reviewing periodic servicing reports. Any subsequent changes in the rating will be
publicly announced and disseminated through Moody’s Client Service Desk.
RELATED RESEARCH
Visit www.moodys.com for more
details
For a more detailed explanation of Moody’s approach to this type of transaction as well
as similar transactions please refer to the following reports:
Performance Review
−
Australian RMBS Performance Review: Q2 2006, September 2006 (SF81717)
Rating Methodology
−
AU-MILAN - The Scoring Formula Revisited - Moody's Individual Loan Analysis for
Australian RMBS, August 2003 (SF25565)
−
The Impact of Mortgage Insurance on the Subordination Level of Australian MBS,
July 2003 (SF8895)
To access any of these reports, click on the entry above. Note that these references are current as of the date of
publication of this report and that more recent reports may be available. All research may not be available to all clients.
10 • Moody’s Investors Service
RAMS Mortgage Securities Trust in respect of Series 2006-1
APPENDIX
Chart 3:
RAMS Delinquency Performance
(Arrears as a percentage of current balance)
2.00%
1.80%
1.60%
1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan98
98 99
99 00
00 01
01 02
02 03
03 04
04 05
05 06
RAMS 30-60 days Delinquency
RAMS 60+ days Delinquency
Australian RMBS Market 30+ days Delinquency
Chart 4:
Geographical Distribution
Tasmania
0.49%
South Australia
1.69%
Australian Capital
Territory
1.73%
Northern Territory
0.32%
New South Wales
28.28%
Victoria
18.44%
Queensland
21.49%
Western Australia
27.56%
Chart 5:
Scheduled LTV Distribution
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
>0%
and
≤50%
>50%
and
≤55%
>55%
and
≤60%
RAMS Mortgage Securities Trust in respect of Series 2006-1
>60%
and
≤65%
>65%
and
≤70%
>70%
and
≤75%
>75%
and
≤80%
>80%
and
≤85%
>85%
and
≤90%
>90% >95%
and
and
≤95% ≤100%
Moody’s Investors Service • 11
Table 1:
Mortgage Pool Summary as at August 30, 2006
Mortgage Pool Summary
Pool Size (A$)
Percentage of Total
Number of Loans
W.A. Original LTV
W.A. Scheduled LTV
W.A. Current LTV
W.A. Seasoning (months)
Average Loan Balance (A$)
Maximum Loan Balance (A$)
Scheduled LTV
>0% and ≤50%
>50% and ≤55%
>55% and ≤60%
>60% and ≤65%
>65% and ≤70%
>70% and ≤75%
>75% and ≤80%
>80% and ≤85%
>85% and ≤90%
>90% and ≤95%
>95% and ≤100%
Seasoning
>0 months and ≤6 months
>6 months and ≤12 months
>12 months and ≤18 months
>18 months and ≤24 months
>24 months
Property Value
>A$0 and ≤A$300,000
>A$300,000 and ≤A$500,000
>A$500,000 and ≤A$1,000,000
>A$1,000,000
Property Type
Detached
Units/Townhouses
Land
Occupancy
Owner Occupied
Investment
Loan Purpose
Purchase
Refinance
Amortisation Schedule
Principal & Interest
Interest Only ≤ 5 Years
Interest Only > 5 Years
Fixed/Var
Fixed
Var
Income Verification
Verified Income
Low Doc
No Doc
State Distribution
Australian Capital Territory
New South Wales
Northern Territory
Queensland
South Australia
Tasmania
Victoria
Western Australia
Metro/Non Metro
Metro
Non-Metro
Mortgage Insurance Cover
HLIC (Aaa)
Genworth (Aa2)
PMI (Aa2)
12 • Moody’s Investors Service
TOTAL
743,733,958
100%
3,393
72.14%
71.98%
69.70%
4.7
219,197
1,000,000
10.14%
3.50%
5.16%
5.22%
14.33%
5.77%
41.45%
2.54%
6.79%
5.10%
0.00%
90.35%
6.48%
1.11%
0.25%
1.80%
28.31%
39.31%
28.67%
3.72%
84.83%
14.66%
0.50%
64.66%
35.34%
53.09%
46.91%
46.54%
45.14%
8.32%
0.52%
99.48%
38.64%
32.68%
28.69%
1.73%
28.33%
0.32%
21.49%
1.69%
0.49%
18.39%
27.56%
68.30%
31.70%
0.14%
31.41%
68.45%
RAMS Mortgage Securities Trust in respect of Series 2006-1
Table 2:
Detailed Mortgage Pool Summary as at August 30, 2006
Scheduled LTV
RAMS 2006-1
LTV ≤80%
TOTAL
Property Value
LTV >80%
≤A$500,000
Property Type
>A$500,000
Occupancy
Detached
Units
Amortisation
Owner Occ
Investment
P&I
Fixed/Var
IO
Fixed
Income Verification
Var
Verified
Low Doc
No Doc
213,351,780
Mortgage Pool Summary
Pool Size (A$)
Percentage of Total
Number of Loans
743,733,958
502,866,137
240,867,821
630,943,071
112,790,887
480,862,244
262,871,714
346,132,841
397,601,118
3,836,697
739,897,261
287,362,587
243,019,591
100%
636,390,215 107,343,744
86%
14%
68%
32%
85%
15%
65%
35%
47%
53%
1%
99%
39%
33%
3,393
2,967
426
2,776
617
2,891
502
2,309
1,084
1,605
1,788
19
3,374
1,258
1,020
29%
1,115
W.A. Original LTV
72.14%
69.19%
89.63%
74.22%
67.79%
71.54%
75.45%
70.72%
74.73%
71.47%
72.72%
77.58%
72.11%
75.90%
73.44%
65.58%
W.A. Scheduled LTV
71.98%
69.03%
89.49%
74.05%
67.66%
71.39%
75.27%
70.53%
74.64%
71.19%
72.67%
77.46%
71.95%
75.61%
73.33%
65.56%
W.A. Current LTV
69.70%
66.50%
88.67%
71.78%
65.36%
69.09%
73.11%
68.05%
72.72%
69.65%
69.75%
77.30%
69.66%
73.68%
71.25%
62.58%
4.7
4.6
5.0
4.8
4.4
4.7
4.9
4.6
4.9
5.4
4.1
7.1
4.7
5.9
4.4
3.5
219,197
214,489
251,981
181,148
390,385
218,244
224,683
208,256
242,502
215,659
222,372
201,931
219,294
228,428
238,255
191,347
1,000,000
1,000,000
842,140
469,469
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
868,951
1,000,000
405,800
1,000,000
900,000
1,000,000
1,000,000
W.A. Seasoning (months)
Average Loan Balance (A$)
Maximum Loan Balance (A$)
Scheduled LTV
>0% and ≤50%
10.14%
10.14%
0.00%
5.06%
5.08%
9.27%
0.87%
8.29%
1.85%
5.78%
4.35%
0.02%
10.12%
3.66%
1.88%
4.60%
>50% and ≤55%
3.50%
3.50%
0.00%
2.21%
1.29%
3.02%
0.48%
2.84%
0.66%
2.23%
1.27%
0.04%
3.46%
1.50%
0.78%
1.22%
>55% and ≤60%
5.16%
5.16%
0.00%
2.63%
2.53%
4.47%
0.69%
3.89%
1.27%
2.69%
2.47%
0.04%
5.13%
1.91%
1.32%
1.93%
>60% and ≤65%
5.22%
5.22%
0.00%
3.21%
2.01%
4.81%
0.40%
4.03%
1.19%
2.57%
2.64%
0.00%
5.22%
1.31%
1.46%
2.45%
>65% and ≤70%
14.33%
14.33%
0.00%
9.38%
4.95%
12.45%
1.88%
9.32%
5.01%
6.33%
8.00%
0.00%
14.33%
2.21%
2.93%
9.18%
>70% and ≤75%
5.77%
5.77%
0.00%
3.49%
2.28%
4.78%
0.99%
3.81%
1.97%
3.05%
2.73%
0.03%
5.74%
2.50%
2.95%
0.32%
>75% and ≤80%
41.45%
41.45%
0.00%
28.97%
12.48%
34.46%
6.99%
21.56%
19.89%
14.72%
26.73%
0.23%
41.22%
11.33%
21.24%
8.89%
>80% and ≤85%
2.54%
0.00%
2.54%
2.06%
0.48%
2.17%
0.37%
1.78%
0.76%
1.32%
1.22%
0.04%
2.49%
2.36%
0.12%
0.06%
>85% and ≤90%
6.79%
0.00%
6.79%
5.91%
0.88%
5.60%
1.19%
4.96%
1.83%
4.13%
2.66%
0.07%
6.72%
6.75%
0.00%
0.04%
>90% and ≤95%
5.10%
0.00%
5.10%
4.71%
0.40%
3.79%
1.31%
4.18%
0.92%
3.72%
1.39%
0.06%
5.05%
5.10%
0.00%
0.00%
>95% and ≤100%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
27.43%
Seasoning
>0 months and ≤6 months
90.35%
77.81%
12.54%
60.81%
29.54%
76.88%
13.47%
58.41%
31.95%
41.60%
48.76%
0.44%
89.92%
33.92%
29.01%
>6 months and ≤12 months
6.48%
5.13%
1.35%
4.61%
1.88%
5.56%
0.93%
4.77%
1.71%
3.08%
3.40%
0.02%
6.46%
3.03%
2.27%
1.19%
>12 months and ≤18 months
1.11%
0.97%
0.14%
0.79%
0.33%
0.74%
0.38%
0.51%
0.60%
0.45%
0.66%
0.00%
1.11%
0.26%
0.78%
0.08%
>18 months and ≤24 months
0.25%
0.25%
0.00%
0.20%
0.05%
0.25%
0.00%
0.09%
0.16%
0.13%
0.12%
0.00%
0.25%
0.09%
0.16%
0.00%
>24 months
1.80%
1.40%
0.40%
1.21%
0.59%
1.41%
0.38%
0.87%
0.93%
1.28%
0.52%
0.06%
1.74%
1.34%
0.46%
0.00%
Property Value
>A$0 and ≤A$300,000
28.31%
21.51%
6.80%
28.31%
0.00%
23.51%
4.80%
18.77%
9.54%
15.26%
13.05%
0.22%
28.09%
12.10%
8.55%
7.66%
>A$300,000 and ≤A$500,000
39.31%
33.43%
5.88%
39.31%
0.00%
33.86%
5.45%
26.57%
12.74%
19.94%
19.37%
0.26%
39.05%
16.39%
11.44%
11.47%
>A$500,000 and ≤A$1,000,000
28.67%
27.02%
1.65%
0.00%
28.67%
24.09%
4.57%
17.12%
11.54%
10.21%
18.46%
0.04%
28.63%
9.27%
11.18%
8.21%
3.72%
3.61%
0.11%
0.00%
3.72%
3.38%
0.35%
2.20%
1.53%
1.13%
2.59%
0.00%
3.72%
0.87%
1.50%
1.34%
>A$1,000,000
RAMS Mortgage Securities Trust in respect of Series 2006-1
Moody’s Investors Service • 13
Table 2 – continued:
Detailed Mortgage Pool Summary as at August 30, 2006
Scheduled LTV
RAMS 2006-1
TOTAL
LTV ≤80%
Property Value
LTV >80%
≤A$500,000
Property Type
>A$500,000
Detached
Occupancy
Units
Owner Occ
Amortisation
Investment
P&I
Fixed/Var
IO
Fixed
Income Verification
Var
Verified
Low Doc
No Doc
Property Type
Detached
84.83%
73.28%
11.56%
57.37%
27.47%
84.83%
0.00%
59.02%
25.81%
41.63%
43.20%
0.44%
84.39%
32.15%
28.05%
Units/Townhouses
14.66%
12.02%
2.65%
9.79%
4.87%
0.00%
14.66%
5.57%
9.10%
4.60%
10.06%
0.08%
14.59%
6.16%
4.48%
4.02%
0.50%
0.27%
0.23%
0.45%
0.05%
0.00%
0.50%
0.06%
0.44%
0.30%
0.20%
0.00%
0.50%
0.33%
0.15%
0.03%
Owner Occupied
64.66%
53.73%
10.92%
45.34%
19.32%
59.02%
5.63%
64.66%
0.00%
38.71%
25.95%
0.44%
64.22%
28.26%
21.32%
15.07%
Investment
35.34%
31.83%
3.51%
22.28%
13.07%
25.81%
9.54%
0.00%
35.34%
7.83%
27.51%
0.08%
35.27%
10.38%
11.35%
13.61%
Land
24.64%
Occupancy
Loan Purpose
Purchase
53.09%
43.43%
9.66%
34.07%
19.02%
43.66%
9.43%
32.31%
20.78%
26.80%
26.29%
0.22%
52.86%
23.93%
15.96%
13.21%
Refinance
46.91%
42.14%
4.77%
33.54%
13.37%
41.18%
5.73%
32.34%
14.57%
19.74%
27.17%
0.29%
46.62%
14.71%
16.72%
15.48%
Amortisation Schedule
Principal & Interest
46.54%
37.38%
9.16%
35.20%
11.34%
41.63%
4.91%
38.71%
7.83%
46.54%
0.00%
0.35%
46.19%
23.58%
13.37%
9.59%
Interest Only ≤ 5 Years
45.14%
40.41%
4.73%
26.92%
18.21%
35.75%
9.39%
20.04%
25.10%
0.00%
45.14%
0.17%
44.97%
12.15%
17.09%
15.90%
Line of Credit > 5 Years
8.32%
7.78%
0.54%
5.49%
2.83%
7.45%
0.87%
5.91%
2.41%
0.00%
8.32%
0.00%
8.32%
2.91%
2.22%
3.20%
Fixed/Var
Fixed
0.52%
0.35%
0.16%
0.48%
0.04%
0.44%
0.08%
0.44%
0.08%
0.35%
0.17%
0.52%
0.00%
0.34%
0.12%
0.06%
99.48%
85.22%
14.27%
67.14%
32.35%
84.39%
15.09%
64.22%
35.27%
46.19%
53.29%
0.00%
99.48%
38.30%
32.56%
28.63%
Verified Income
38.64%
24.42%
14.22%
28.49%
10.15%
32.15%
6.48%
28.26%
10.38%
23.58%
15.05%
0.34%
38.30%
38.64%
0.00%
0.00%
Low Doc
32.68%
32.56%
0.12%
19.99%
12.69%
28.05%
4.63%
21.32%
11.35%
13.37%
19.31%
0.12%
32.56%
0.00%
32.68%
0.00%
No Doc
28.69%
28.59%
0.09%
19.13%
9.55%
24.64%
4.05%
15.07%
13.61%
9.59%
19.10%
0.06%
28.63%
0.00%
0.00%
28.69%
Var
Income Verification
State Distribution
Australian Capital Territory
New South Wales
Northern Territory
1.73%
1.37%
0.35%
1.34%
0.39%
1.65%
0.08%
1.26%
0.47%
1.01%
0.72%
0.00%
1.73%
1.01%
0.55%
0.17%
28.33%
23.63%
4.70%
16.64%
11.69%
23.86%
4.47%
19.71%
8.62%
14.33%
14.00%
0.18%
28.15%
13.97%
8.83%
5.53%
0.32%
0.28%
0.05%
0.21%
0.11%
0.24%
0.09%
0.08%
0.24%
0.08%
0.24%
0.00%
0.32%
0.10%
0.09%
0.13%
21.49%
18.74%
2.75%
15.39%
6.10%
18.39%
3.10%
12.98%
8.51%
8.32%
13.17%
0.04%
21.45%
6.94%
8.14%
6.41%
South Australia
1.69%
1.47%
0.22%
1.52%
0.17%
1.66%
0.02%
1.10%
0.59%
0.91%
0.78%
0.00%
1.69%
0.41%
0.66%
0.61%
Tasmania
0.49%
0.46%
0.03%
0.27%
0.22%
0.36%
0.13%
0.28%
0.21%
0.20%
0.29%
0.00%
0.49%
0.30%
0.09%
0.11%
Queensland
Victoria
18.39%
14.48%
3.91%
14.07%
4.33%
15.15%
3.25%
13.24%
5.15%
10.81%
7.58%
0.07%
18.32%
8.90%
5.62%
3.87%
Western Australia
27.56%
25.13%
2.43%
18.18%
9.38%
23.53%
4.02%
16.01%
11.55%
10.88%
16.67%
0.22%
27.34%
7.01%
8.70%
11.85%
Metro/Non Metro
Metro
68.30%
59.14%
9.15%
43.11%
25.19%
56.40%
11.90%
44.25%
24.04%
31.85%
36.45%
0.37%
67.92%
26.15%
22.67%
19.47%
Non-Metro
31.70%
26.43%
5.28%
24.51%
7.20%
28.44%
3.27%
20.40%
11.30%
14.69%
17.01%
0.14%
31.56%
12.48%
10.00%
9.22%
Mortgage Insurance Cover
HLIC (Aaa)
0.14%
0.14%
0.00%
0.09%
0.05%
0.14%
0.00%
0.10%
0.04%
0.14%
0.00%
0.00%
0.14%
0.14%
0.00%
0.00%
Genworth (Aa2)
31.41%
27.68%
3.73%
21.36%
10.06%
26.54%
4.88%
22.18%
9.24%
14.70%
16.72%
0.13%
31.29%
8.76%
12.26%
10.39%
PMI (Aa2)
68.45%
57.75%
10.70%
46.16%
22.28%
58.16%
10.29%
42.37%
26.07%
31.70%
36.74%
0.39%
68.05%
29.73%
20.42%
18.30%
14 • Moody’s Investors Service
RAMS Mortgage Securities Trust in respect of Series 2006-1
RESIMAC Premier Euro 2006-1E Trust
Moody’s Investors Service • 15
SF81870isf
© Copyright 2006, Moody’s Investors Service, Inc. and/or its licensors and affiliates including Moody’s Assurance Company, Inc. (together, “MOODY’S”). All rights
reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE
REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR
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This credit rating opinion has been prepared without taking into account any of your objectives, financial situation or needs. You should, before acting on the
opinion, consider the appropriateness of the opinion having regard to your own objectives, financial situation and needs.
16 • Moody’s Investors Service
RAMS Mortgage Securities Trust in respect of Series 2006-1