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AOFM: Tells Economics Committee ~ 'not seen' or 'heard' of any [fraud] evidence

Posted by on in RMBS SECURITISATION
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Australian Office of Financial Management [AOFM] or simply a "RMBS ~Toxic Waste Dump":

AOFM's Opening Statement ["the statement"]:- mischievously re-labels clear & present fraud as "low-doc PRIME loans"; ignores credibility voided Ratings Agencies' fudged RMBS "AAA" purported status; No loan application form and/or process "integrity" checks necessary --as there's simply NO EVIDENCE OF FRAUD; and asserts..."is 'clearly' a matter for the financial industry ["the perpetrators"] to organise, practise and 'monitor' [and]..it would simply not be practical [or reasonable] for the AOFM to employ the substantial resources required to 'vet the detail' of every mortgage behind every RMBS transaction."

Being practicable, --a good [indeed reasonable] start would be to "rifle-shot" target the low lying "fruit from the poison tree" [vis a vis "shotgun" approach 129,000 "unsafe/unclean" loans] a measly basket full of only 2000 "low-doc PRIME loans", declared present & counted on AOFM's books, begging for a "reprieve" --in God's mercy".  

Such gross mis-diection employed craftily by AOFM's ill-conceived Statement, is simply incomprehensible given it's acknowledgment, that, ..."we are aware through the 'media' and this "enquiry" that [substantive] allegations have been made regarding "fraudulently originated mortgages" although we have 'not seen' or 'heard' of any evidence of this in connection with the mortgages underpinning AOFM's RMBS portfolio." --and notwithstanding 'stress-test' scenarios given, [any]..."extreme circumstances that would test the 'robustness' [refer below; 'flawed' AOFM defences] the obvious one being the case whereby 'the mortgages are declared '"legally invalid", resulting in the loss of access to the associated stream of payments," ...for the life of the loan period, one must not "neatly" overlook.

What if, the true & correct "stress test" dictated an alternative scenario ["B"] --that at least, if not more than, 10 per cent of it's portfolio's "full-doc PRIME loans" were also infected by way of 'metastasised' loan-doc fraud? In those very dire circumstances, indeed conceivable, premised on BFCSA's empirical knowledge hitherto, then YOUR limited scenario "A" (for 'An') estimate of just 0.50% estimated loss of pool, in this 'extreme' scenario, would otherwise cause the AOFM to suffer 'catastrophic' losses on it's investment, and the corollary --equating to what "%" of the AOFM's total investment?

But, please allow me to save you the exercise, since your unwilling to participate in such trivial dialogue, --it equates to losses crtyallised into the $billions upon billions of tax payer 'hard-earned-money" --being writen-off and commensurate provision of public services; you know, things like schools for education, hospitals to care for the people in need, YOUR SALARY & JUNKETS obsolete. As it appears that you are not an impartial observer --on your own admission "vested interests" prevail, since the primary purpose for which AOFM functions is to (mis)manage an RMBS Toxic Waste Dump, made up of tainted Government RMBS Investments, --and once rendered "redundant", good bye cushy AOFM position, perks [et al] for the author of this finely biased Statement of Fallacy.

Now lets contemplate for a moment a further "real" alternative scenario ["C"] and if somewhat reluctant -- just take a look at the court actions underway around the globe challenging the legality of the contrived RMBS "structure" in order to gain a sense of "reality" --that the following is indeed "probable".

That is, an instance where the RMBS structure, in it's entirety, is not only inherently flawed from birth, but a moral stain on society that must be perpetually excised in law, having been built upon, layer upon layer, level by level, of bankster CEO's [fraudulent] "MISCHIEF for BONUS SCHEME" -- a tsunami style outcome -- and consequently rendered ab initio? [adv. (Latin) from the beginning]...??? Outcome Required AOFM...Who picks up the tab, taxpayers?  

The Australian Government thru it's conduit AOFM, holds a clear duty of care absolute, express or tacit, in which it "must not be profiting from a fraud...and also "must not be seen to be profiting from a fraud".

Is the AOFM maintaining the view, that it's mandate does not express a "fiduciary duty" to act on behalf of the taxpayer [your very paymaster] --to ensure the preservation of Government [tax-payer] funds against prevalent "unscrupulous" financial institutions, self regulated, running amok and engaging in widespread misleading and deceptive conduct, --in placing highly complex collateralised debt obligations into the portfolio of the Government tax-payer?

AOFM may take heed from recent observations espoused by Federal Court judge Rares, pertaining to such "toxic-waste" products, who stated;

"By [Lehman Brothers] preying on an arm of government, the deception to society itself was rendered complete." --Wingecarribee Shire Council v Lehman Brothers Australia (in liq) [2012] FCA 1028 at 14]. 

Hence, it's further perplexing to an honest and reasonable person to "see and hear" AOFM assert in all good manners, that..."it would simply not be practical [or reasonable] for the AOFM to employ the substantial resources required to 'vet the detail' of every mortgage behind every RMBS transaction in which it has or may be asked to support." ...when an initial "probing" investigation would be directed towards the mortgages most prone to fraud, being the AOFM's so called-- "low-doc PRIME loans". 

Assisted --where practicable thru an allocation of resources --BFCSA(inc) would happily mobilise it's "skill & knowledge" base to discover & expose such fraudulent banker behaviour concerning specifically an alleged AOFM -- "inherited" -- tainted loan application form process & 'voidable' documentation, premised on widespread financial institution "home-loan-fraud".

After all, a simple letter to each respective low-doc 'prime' loan --attaching "full-documentation" of that specific loan [at the lenders expense] and enclosing a simple "questionaire" &/or requisition of the relevant "facts & circumstances" --surrounding the loan approval process, would pretty much let the 'elephant in the room" stand up and be counted [one by one], and between mates -- AOFM & lenders [et al] -- how much for some "postage &[docs] handling" on a lazy, 2000 home-owners (?) --otherwise destined to be securitised into oblivion and converted to the status of "HOME-GROWN AUSTRALIAN REFUGEES",that is, within the scope of a $20+ billion dollar "Government RMBS Investment" Program"? 

 

---AOFM:  Opening Statement Economics References Committee Enquiry into the post-GFC banking sector 21 Sept, 2012:

[Utterly --"Complicit"  ---actively facilitating the systematic 'defrauding' of Australians out of 'their' lawfully cherished homes]

"The AOFM appreciates the opportunity to add to the record regarding it's 'involvement' in the Residential Mortgage Backed Securities ["RMBS"] market and in particular it's exposure to low doc loans.

There are extreme circumstances that would test the 'robustness' of these [flawed] lines of defence --the obvious one being the case whereby 'the mortgages are declared '"legally invalid" resulting in the loss of access to the associated stream of payments.

The AOFM, only invests in RMBS that contains mortgages that have already been 'originated', it has neither involvement in, nor control over, how the 'practice' of mortgage lending is undertaken... 

 "We estimate, that there are over 129,000 mortgages that underpin the RMBS transactions that we have been asked to analyse and support, ...and of this total about 2000 of those would have been low doc loans."

"...it participates in RMBS, [however] the AOFM does not purchase loans per se, but rather it invests in 'securities'[semantics personified], which are secured by prime loans, some of them 'low doc' loans."

"...there are no 'subprime' loans amongst the mortgages underpinning the RMBS in which the AOFM has invested."

"...[acknowledge, that they] went into this investment activity aware that the performance of low-doc mortgages is on average worse than full doc mortgages."

"...has maintained the view that it's mandate does not include seeking to fundamentally change the nature and structure of the RMBS market, and the mortgage market more generally."

"...see our role as facilitating the use of the securitisation as a means of capital raising for the small ADI's and non ADI's[like "Banksia" & "provident"], thereby providing more general support to competition in the market for prime mortgages."

"...have not sort to improve 'value' judgments about the sort of lending that is 'worthy' of Government support."

"...as low-doc lending was a valid form of lending had we declined to invest in RMBS supported by pools containing at least 'some' low doc loans, availability of credit to the self employed would have been 'negatively' impacted."

"...has in place a 'risk-based' due diligence program for it's RMBS investment activity. However the level of assessment varies depending upon the particulars of the 'sponsor'.

"...small 'unrated' sponsor(s) will typically receive a site visit from us in which we conduct interviews with key personal with a 'focus' on the organizations 'loan-approval' process and it's ongoing 'servicing' and 'collections' framework."

"...will raise any concerns and require satisfactory changes 'prior' to agreeing to invest."

"...'site' visits continue on a regular basis, even if no further investment is in prospect. The AOFM

"...recently answered questions on notice regarding the number of rejections it has of RMBS 'investment proposals', including those on risk management grounds."

"...for reasons of 'confidentiality', we don't want to get into the detail on who specifically has been rejected and why."

"...believes it has allocated sufficient professional expertise to the management of the RMBS program, to anticipate the resulting risks to the taxpayer.

"...as at the end of July[2012], the 30day+ 'arrears' for it's portfolio stood at 1.1 per cent; this was below the full doc and broader 'prime' benchmarks."

"...just two of 98 securities... 'invested' [last four years] have been downgraded."

"....downgrades 'occurred' as result of a ratings agency 'changing' it's 'methodology'; and both have since had their "AAA ratings" reinstated {Nov 2012, court "loss of credibility" against "standard & Poor's" necessitates an independent rewiw of all securities "ratings integrity"] 

"...as well as AOFM's 'due diligence' activities, it's investments benefit from a number of 'lines of defence'... requires what are known as 'pool' and 'tie back' audits.

"...insist that each pool audit specifically reference AOFMS's minimum criteria...[additionally] lenders mortgage insurance covers the vast majority of pools...around 98 per cent across the AOFM's RMBS portfolio.

"...a crucial line of 'risk' defence is the so called 'tranching' of each transaction, ...limits placed on the AOFM's investments to AAA rated notes

"...despite these 'defences'...we could consider in 'theory' the impact of this [catastrophic event] as an scenario, and in fact take it to it's extreme and assume that all 'low-doc' loans were considered ‘worthless’ from an RMBS investment standpoint."
 
"...investments stood at $11.1 billion as at 31 August, 2012."
 
"...mortgage pools backing these investments [incl. other participants] contained a total of around $25 billion at this time. Of these $25 billion in mortgages, less than 2 per cent, or just over $400 million, comprised low doc loans. However, the ranking of the tranches in which the AOFM has invested means that any 'losses', even in the most catastrophic event, would be significantly less than this amount.
 
"...our lines of defence, namely lenders' mortgage insurance, would provide protection in this scenario. However, the third line of defence in the form of subordination would provide a significant buffer. We estimate, in this 'extreme' scenario the AOFM would suffer a loss on it's investment equating to around '0.50' per cent of the AOFM's total investment.

"...only invests in RMBS that contains mortgages that have already been 'originated', it has neither involvement in, nor control over, how the 'practice' of mortgage lending is undertaken. [just dandy, turn a Nelson's eye, like the girl said to the sailor, "follow me"]

"...is 'clearly' a matter for the financial industry to organise, practise and 'monitor'"["about 2000 of those low-doc would have been a "good start] 

"...simply not be practical [or reasonable] for the AOFM to employ the substantial resources required to 'vet the detail' of every mortgage behind every RMBS transaction in which it has or may be asked to support. We estimate, that there are over 129,000 mortgages that underpin the RMBS transactions that we have been asked to analyse and support."

"... and of this total about 2000 of those would have been low doc loans." 

_____________________________________________________________________
http://www.aofm.gov.au/content/_download/rmbs/Senate_Committee_Hearing.pdf
 

"The AOFM appreciates the opportunity to add to the record regarding it's 'involvement' in the Residential Mortgage Backed Securities market and in particular it's exposure to low doc loans. To clarify the means by which it participates in RMBS, the AOFM does not purchase loans per se, but rather it invests in 'securities', which are secured by prime loans, some of them 'low doc' loans. Furthermore, there are no 'subprime' loans amongst the mortgages underpinning the RMBS in which the AOFM has invested.

Let me explain...the basis the AOFM's involvement in 'low-doc' loans. Since the commencement of the RMBS program in 2008, the AOFM has maintained the view that it's mandate does not include seeking to fundamentally change the nature and structure of the RMBS market, and the mortgage market more generally.

We see our role as facilitating the use of the securitisation as a means of capital raising for the small ADI's and non ADI's[ie: Banksie & Provident"], thereby providing more general support to competition in the market for prime mortgages.

We have not sort to improve 'value' judgments about the sort of lending that is 'worthy' of Government support. As low doc lending was a valid form of lending to the "self-employed" and small business owners, had we declined to invest in RMBS supported by pools containing at least 'some' low doc loans, it is likely that the availability of credit to the self employed would have been 'negatively' impacted.

Having said that, the AOFM went into this investment activity aware that the performance of low-doc mortgages is on average worse than full doc mortgages. By this we mean that the 'arrears' experience for pools of predominately low doc 'prime' loans is 'typically' above that of pools containing solely full doc 'prime' loans. To illustrate this point, as at the end of June this year, Standard & Poor's reported a 30days+ arrears rate for all prime loans of 1.50 per cent, which they decomposed 1.26 for 'prime' full-doc loans and 6.07 per cent for 'prime' low-doc loans.

For pools containing more than 10 per cent low-doc loans, the AOFM has insisted on RMBS sponsors meeting additional criteria and measures, including that a cap on the maximum loan to valuation ratio of all these loans be set at a 'lower' level, and requiring that these loans be covered by lenders mortgage insurance. To date, the AOFM have only participated in one transaction where the share of low doc loans was greater than 10 per cent of the underlying pool, and in this case it only invested 10 million, of which over half has been repaid 'without incident' in the two years since the investment was made. 

(note: no apparent 'probity-checks' on fraud 'manifested' [illegitimate-duress] forced and/or [ wilfully-unjust]lender-imposed RMBS redemptions linked to AOFM's pool of 'investments').  

AOFM has in place a 'risk-based' due diligence program for it's RMBS investment activity. [> more like a "Risk-Averse" program]. However the level of assessment varies depending upon the particulars of the 'sponsor'. [code for --mates getting the 'light-touch']. A small 'unrated' sponsor will typically receive a site visit form us in which we conduct interviews with key personal with a 'focus' on the organizations 'loan-approval' process and it's ongoing 'servicing' and 'collections' framework. The AOFM will raise any concerns and require satisfactory changes 'prior' to agreeing to invest.

The 'site' visits continue on a regular basis, even if no further investment is in prospect. The AOFM recently answered questions on notice regarding the number of rejections it has of RMBS 'investment proposals', including those on risk management grounds. For reasons of 'confidentiality', we don't want to get into the detail on who specifically has been rejected and why.

Suffice to say believes it has allocated sufficient professional expertise to the management of the RMBS program and specifically to anticipate the resulting risks to the taxpayer. As at the end of July, the 30day+ 'arrears' for it's portfolio stood at 1.1 per cent; this was below the full doc and broader 'prime' benchmarks to which one just referred. Furthermore, just two of 98 securities in which the AOFM has invested of the last four years have been downgraded. Both of these downgrades 'occurred'  as result of a ratings agency 'changing' it's 'methodology'; and both have since had their "AAA ratings" reinstated.

As well as the AOFM's 'due diligence' activities, it's investments benefit from a number of lines of defence. Specifically, the AOFM requires what are known as 'pool' and 'tie back' audits. We insist that each pool audit specifically reference AOFMS's minimum criteria. As another line of 'risk' defence, lenders mortgage insurance covers the vast majority of pools, with the weighted average coverage rate being around 98 per cent across the AOFM's RMBS portfolio. Yet another crucial line of 'risk' defence is the so called 'tranching' of each transaction, together with the limits placed on the AOFM's investments to AAA rated notes, this means that the owners of more heavily weighted subordinated, or 'first-loss' tranches, provide additional protection, to the AOFM's interests.

There are extreme circumstances that would test the 'robustness' of these lines of defence --the obvious one being the case whereby the mortgages are declared "legally invalid", resulting in the loss of access to the associated stream of payments. 

"We are aware through the "media" and this enquiry that allegations have been made regarding "fraudulently" originated mortgages although we have 'not seen' (n)or 'heard' of any evidence of this in connection with the mortgages underpinning AOFM's RMBS portfolio." 

[so, Mr AOFM, ...how about ensuring all BFCSA(inc) members be given confirmation of the particular 'tranche' their  respective 'securitized' mortgage may have been destined to arrive, as requested under the Privacy Act of recent?]

Having said that, and despite these 'defences' [referred to above] we could consider in 'theory' the impact of this as an scenario, and in fact take it to it's extreme and assume that all low doc loans were considered ‘worthless’ from an RMBS investment standpoint.

First the AOFM's investments stood at $11.1 billion as at 31 August, 2012. The mortgage pools backing these investments contained a total of around $25 billion at this time. Of these $25 billion in mortgages, less than 2 perc cent, or just over $400 million, comprised [of] 'low-doc' loans. However, the ranking of the tranches in which the AOFM has invested means that any 'losses', even in the most catastrophic event, would be significantly less than this amount.

It is unlikely, that one of our lines of defence, namely lenders' mortgage insurance, would provide protection in this scenario. However, the third line of defence in the form of subordination would provide a significant buffer. We estimate, in this 'extreme' scenario the AOFM would suffer a loss on it's investment equating to around '0.50' per cent of the AOFM's total investment.[$50m?~$100m?]

Finally, because the AOFM only invests in RMBS that contains mortgages that have already been 'originated', it has neither involvement in nor control over how the 'practice' of mortgage lending is undertaken. [just dandy, turn a Nelson's eye, like the girl said to the sailor, "follow~me"]

This is 'clearly' a matter for the financial industry to organise, practise and 'monitor'. Furthermore, it would simply not be practical [or reasonable] for the AOFM to employ the substantial resources required to 'vet the detail' of every mortgage behind every RMBS transaction in which it has or may be asked to support.

We estimate, that there are over 129,000 mortgages that underpin the RMBS transactions that we have been asked to analyse and support, and of this total about 2000 of those would have been 'low-doc' loans __________________________________________________________________________________________________________________________

 

PS: Note: to frustrate publishing above AOFM document--

--measures were put in place so as to not be able to simply copy i it'e entirety other than "by-hand' [re-typed] 

 

Furthermore: AOFM states on it's website

 

; "A summary of AOFM's participation in RMBS transactions is available via the following link" ---

---however, curiously -- it downloads/presents "blank" information

 

AOFM participation in RMBS transactions:-   http://www.aofm.gov.au/content/rmbs.asp   [but --blank download]

 

AOFM participation in RMBS transactions

 

RESIDENTIAL MORTGAGE-BACKED SECURITIES

Scope

The Australian Office of Financial Management (AOFM) has been directed by the Treasurer to invest temporarily in Australian Residential Mortgage-Backed Securities (RMBS) to support competition in mortgage lending from a diverse range of lenders. The Treasurer's Directions are available via the following links:

Details on the AOFM's RMBS investment program are available in the 2008-2009 Annual Report.

Reporting on RMBS

A summary of AOFM participation in RMBS transactions is available via the following link:

 

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Comments

  • doyla66
    doyla66 Wednesday, 14 November 2012

    AOFM spouts pure 'meaningless waffle' trying to dodge any responsibility. "WILLFULL BLINDNESS" is he term. Hear no evil, see no evil, speak no evil. Just try & plead ignorance of the facts!

    I see they refer to Standard & Poor's ratings to try & give their claims some sort of credibility, the same Standard & Poor's that have just been FINED over $20 MILLION DOLLARS, for deceptive & misleading conduct in their ratings!

    I could sit here & dissect their utterly useless waffle, but there is too much well rehearsed 'piffle' in there, it would take me all day. I am sure that the Senators are also sick & tired of hearing their same old, same old.

  • doyla66
    doyla66 Wednesday, 14 November 2012

    EUROPEAN CRISIS: "Australia could follow Spain's credit descent": S&P

    Indeed Wayne--S&P: Aust could follow Spain's credit descent--risks losing its AAA credit rating if it is unable to get its federal budget back to surplus by 2014, according to the global director of public finance at Standard & Poor's Financial Services.

    The official, Kyran Curry, has been a long-time primary credit analyst for Australia and told The Australian Financial Review that there are similarities between Australia's relatively indebted banking system and Spain's position before it began its rapid descent into its debt crisis.

    “For Australia, it comes back to the government restoring its fiscal position as conditions allow and there won't be significant pressure on the ratings unless something cataclysmic happens and the government is unable to return its balance to surplus this year or next,” Mr Curry said, according to the AFR.

    “If there's a sustained delay in returning the balance to surplus, as the economy gathers momentum and as people start spending again, as the import demand picks up and current account blows out, we might not see the government's fiscal position as being strong enough to offset weaknesses on the external side and that's what worries us.”

    The federal government's recent Mid-Year Economic and Fiscal Outlook forecast a $1.1 billion surplus in 2012/13, but even that has been called into question by the government's softer language around its promised surplus as estimates for mining tax revenues continue to decline.

    “Australia's already, as we see it, got some credit metrics that are right off the scale when it comes to assessing Australia's external position,” Mr Curry said, according to the AFR.

    “It's got high levels of external liabilities, it's got very weak external liquidity and that basically means the banks are very highly indebted compared to their peers.”

    http://www.businessspectator.com.au/bs.nsf/Article/Australia-could-follow-Spains-credit-descent-SP-pd20121114-22NZZ?

  • doyla66
    doyla66 Thursday, 15 November 2012

    I know what you mean, Wayne. They trot out standard phrases that everyone seems to have taken to be true for years. Now we're saying, hang on, what was that, in plain English please? And what does that mean, exactly? And why do you say that? And do you have evidence to support your theories on "Fraud? We have no fraud here"!
    Sometimes I wonder if they actually know what Fraud is? How would they find and/or recognise it? Smacks of auto-denial without aforethought.
    Love the expression piffle! That's what it is!

    Whenever I see a ratings agency expressing an opinion my first reaction is "so what?"
    We're taking back our power from the silly ratings agencies who have held the world's economies to ransom for way too long :D

  • doyla66
    doyla66 Friday, 16 November 2012

    AOFM "evasive & deceptive" to Senators relating to vetting of 2000 low-doc "prime" loans from pool of 129,000 motgages:

    AOFM--obfuscates/misleads Senators: issue re 2000-lowdocs [1.8%/loan-pool]--AOFM morphs/argues vetting 129,000 "not practical" !!!

    "it would simply not be practical [or reasonable] for the AOFM to employ the substantial resources required to 'vet the detail' of every mortgage behind every RMBS transaction."

  • doyla66
    doyla66 Friday, 16 November 2012

    The loose low-doc lending practices of the property boom are coming back to haunt the market. According to Fitch, low-doc loans are more than four times likelier to be in default than standard loans, with 5.5 per cent of all "prime" low-doc loans in default, compared with 1.26 per cent of all standard loans.

    The group tells The Australian low-doc loans are experiencing "considerable deterioration" and there is "no relief in sight".

    Analysis shows the mortgage default rates in many of the funds securitised by Australian institutions -- and since sold to investors in Australia and across the world -- have surged in recent years.

    In the two years to last month, defaults for loans held in Macquarie's PUMA Mater Fund S-7 have ballooned from 2.66 per cent to 7.28 per cent. Defaults in Macquarie's Master Fund S-2 have grown from 2.25 per cent to 6.82 per cent.

    About 90 per cent of loans in the Macquarie securitised funds were low-doc, says Macquarie spokeswoman Kristen Costandi. She says those levels of delinquency as a proportion of each fund were rising because those funds were shrinking. She declined to comment when asked why those funds were shrinking far more rapidly than the life of the underlying loans would suggest.

    Detailed Performances including arrears data of all the RMBS by S&P to June 30 2009
    http://s3.amazonaws.com/zanran_storage/www2.standardandpoors.com/ContentPages/20097171.pdf

    Detailed Performances of all the RMBS by Moodys (need membership) to June 30 2012
    http://www.moodys.com/page/analystresearch.aspx?sd=-1&po=1&bn=Alena%20Chen&sb=p_published_date_time



    Thu Apr 26, 2012 10:04pm EDT

    (The following was released by the rating agency)

    SYDNEY, April 26 (Fitch) Fitch Ratings has assigned PUMA Masterfund S-10's mortgage-backed floating-rate notes ratings as follows:

    AUD152.991m Class A notes: 'AAAsf'; Outlook Stable

    AUD29.223m Class AB notes: 'AAAsf'; Outlook Stable

    AUD6.303m Class B1 notes: 'A+sf'; Outlook Stable

    The notes will be issued by Perpetual Limited in its capacity as trustee of the master fund.

    At the pool cut-off date, the total collateral pool consisted of 624 residential mortgages originated by a network of mortgage managers and mortgage brokers under the Puma programme totaling approximately AUD188m. Fitch's calculated weighted average current loan-to-value ratio was 64%, and the weighted average seasoning was 63 months. Investment loans comprise 41.3% of the pool. Reduced documentation loans make up 45.3% of the portfolio, inclusive of no documentation mortgages, which comprise 22.4% of the pool. Of the mortgages in the portfolio 61.7% are interest-only loans and 7.3% are fixed-rate mortgages. The agency has incorporated all the above-mentioned factors into its credit analysis of the transaction.

    The Long-Term 'AAAsf' rating with Stable Outlook assigned to the Class A and AB notes are based on the quality of the collateral; the 4.6% credit enhancement provided by the subordinate Class B notes and excess spread; and the liquidity reserve account sized at 1.4% of the aggregate invested amount of the notes at closing. The rating also reflects the 100% mortgage insurance policies provided by QBE Lenders' Mortgage Insurance Limited ('AA-'/Stable) and Genworth Financial Mortgage Insurance Pty Limited; the interest rate swap arrangements in place; and Macquarie Securitisation Limited's mortgage underwriting and servicing capabilities.

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