TEXT-Fitch affirms 2 Bluestone Emerald reverse mortgage transactions - Reuters

Mon Jul 23, 2012 12:54pm IST

(The following statement was released by the rating agency)

July 23 - Fitch Ratings has affirmed 6 classes of the Emerald Series of Australian reverse mortgages. The transactions are securitisations of Australian auto and equipment receivables originated by Bluestone Equity Release Pty Limited (Bluestone). The rating actions are listed below.

Emerald I Reverse Mortgage 2006-1 Trust:

AUD96.3m Class A (ISIN AU300EMER013) affirmed at 'AAAsf'; Outlook Stable;

AUD12.9m Class B (ISIN AU300EMER021) affirmed at 'AAsf'; Outlook Stable;

AUD15.5m Class C (ISIN AU300EMER039) affirmed at 'Asf'; Outlook Stable.

Emerald II Reverse Mortgage 2007-1 Trust:

AUD108.6m Class A (ISIN AU3FN0003307) affirmed at 'AAAsf'; Outlook Stable;

AUD13.1m Class B (ISIN AU3FN0003315) affirmed at 'AAsf'; Outlook Stable;

AUD11.7m Class C (ISIN AU3FN0003323) affirmed at 'Asf'; Outlook Stable.

The affirmations reflect Fitch's view that the current credit enhancement levels adequately support the notes' ratings and that the performance of the portfolio, with regards to borrower exit rates, property values and interest rates, remains in line with expectations.

Emerald I Reverse Mortgage 2006-1 Trust:

As of the April 2012 payment date, the trust's reverse mortgage portfolio had experienced 745 borrower exits, amounting to AUD70.9m. Exits typically come in the form of borrower mortality, morbidity (move to long-term aged care), or voluntary prepayments. The majority of exits from the pool to date have been due to voluntary prepayments (520 exits), or loans repurchased by the Bluestone Equity Release Series 1 Warehouse Trust (72 exits). Mortality and morbidity account for 104 and 49 exits, respectively. To date, the voluntary prepayment rate for the pool (excluding repurchases by Bluestone) is 7.4% per annum. The weighted average borrower age was 76.1 years, compared with 70.5 years at issue.

The liability balance for Emerald 2006-1 has risen to a total of AUD124.6m at the April 2012 payment date, from an initial balance of AUD112.2m. There were no unreimbursed drawings on the liquidity facility.

Emerald II Reverse Mortgage 2007-1 Trust:

As of the March 2012 payment date, the trust's reverse mortgage portfolio had experienced 550 borrower exits totalling AUD61.0m. The majority of exits from the pool to date have been due to voluntary prepayments (448 exits), or loans repurchased by the Bluestone Equity Release Series 1 Warehouse Trust (7 exits), while mortality and morbidity account for 77 and 18 exits respectively. To date, the voluntary prepayment rate for the pool (excluding repurchases) is 8.2% per annum. The weighted average borrower age was 75.2 years, compared with 70.9 years at issue.

At March 2012, the liabilities balance has risen to a total of AUD133.4m, from an initial note balance of AUD124.2m. There were no unreimbursed drawings outstanding on the liquidity facility.

Given the nature of the reverse mortgage asset class, these transactions have the unusual feature of an increasing liabilities balance. The increase is primarily driven by the capitalisation of interest, further advances and periodic instalments paid to the borrowers, which are funded by the further advance and committed advance facilities, respectively. It should be noted that the issue balances reflect the amount payable to the note holders, as well as the committed advance facility and further advance facility provider.

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