Moody’s has provided top provisional ratings to $313.13 million of RedZed’s first residential mortgage-backed securities (RMBS) issue of 2018.
The non-bank lender is preparing to launch its first RMBS transaction of 2018, RedZed Trust Series 2018-1, which has an indicative volume of $375 million.
The funding will be raised via seven classes of securities, six of which have been assigned provisional ratings by Moody’s Investors Service.
The majority of the funding will be raised via two tranches of A1 securities and A2 securities, collectively valued at $257.25 million.
RedZed’s A1 and A2 securities have all received AAA ratings from Moody’s.
The agency assigned ratings of AA2 to class B, A2 to class C, BAA2 to class D, BA2 to class E, and B2 to class F — all together valued at $55.13 million.
The two tranches of class G securities, valued at $6.75 million, were not rated.
According to Moody’s, around 92.5 per cent of the loans are to self-employed borrowers.
“This is in line with RedZed’s business model and strategy to focus on the self-employed market. The income of these borrowers is subject to higher volatility than employed borrowers, and they may experience higher default rates,” the ratings agency said.
Further, 89.6 per cent of the portfolio comprises loans extended on an alt doc basis, with 13.3 per cent of borrowers having blemished credit histories.
The ratings agency noted that the portfolio has a weighted-average scheduled loan-to-value ratio (LVR) of 68.6 per cent, with 20.9 per cent of the loans having scheduled LTVs higher than 80 per cent.
Moody’s said that there are no loans with a scheduled LTV more than 85 per cent.
Loans secured by investment properties account for 41.8 per cent of the portfolio, with a further 2.5 per cent of loans secured by both owner-occupied and investment properties.
Further, 90.3 per cent of loans are secured by properties located in metropolitan areas, which Moody’s said is above the market average.
The ratings agency additionally noted that interest-only loans represent 30.3 per cent of the portfolio.
[Related: Liberty Financial’s $300m RMBS gets rated]
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