TEXT-S&P Report Says West Australia Recorded Highest Arrears In Q2

(The following was released by the rating agency)

MELBOURNE (Standard & Poor's) Oct. 10, 2012--Western Australia recorded the nation's highest level of arrears in the second quarter (Q2), ended June 30, 2012, according to a report by Standard & Poor's Ratings Services. The report, "Australian RMBS Performance Watch," says that loans that are greater than 30 days in arrears totaled 1.87% in Western Australia in Q2, followed by Queensland, at 1.82%, and New South Wales, at 1.77%.

The report includes the key findings that:

-- Half of the 10 worst-performing postcodes in Q2 were in coastal areas, with a majority in New South Wales;

-- Investment loans exhibited marginally better arrears performance in the quarter; and

-- The percentage of low-documentation (low-doc) loans in arrears was highest in Tasmania and Western Australia in Q2, while Victoria and the Northern Territory were the best performers.

Loans underlying Australian prime residential mortgage-backed securities (RMBS) that are greater than 30 days in arrears decreased overall in Q2, with the prime Standard & Poor's Mortgage Performance Index (SPIN) at 1.50%, compared with 1.61% in the previous quarter. The SPIN decreased by 19 basis points during the first half due to the effect of lower interest rates. Total prime RMBS outstanding totaled approximately A$114.5 billion in Q2, down 1% from Q1.

The June edition of "Australian RMBS Performance Watch" includes new features such as a breakdown by state of low-doc loans underlying Australian RMBS, the arrears performance over time of investment loans compared with owner-occupied loans, the arrears performance of loans in metropolitan versus nonmetropolitan areas, and a list of the 10 worst-performing postcodes.

We have added these to provide the market with greater transparency and show the trends of different performance attributes over time across the entire prime RMBS portfolio.

Standard & Poor's Mortgage Performance Index (SPIN) measures the weighted-average arrears more than 30 days past due on residential mortgage loans in both publicly and privately rated Australian RMBS transactions. The SPIN is calculated for prime and subprime residential mortgage loans. The indices identify the proportion of loans in arrears in each of the 31-60 days, 61-90 days, and 90+ days' arrears categories. SPIN is calculated on a monthly basis using information provided to Standard & Poor's by the issuers of RMBS transactions.

The report, "Australian RMBS Performance Watch," for the quarter ended June 30, 2012, provides a comprehensive analysis of arrears statistics on loans underlying Australian RMBS. The report can be found on RatingsDirect, at " ", under the Global Research Publications window. Select Structured Finance Research from the drop-down menu in this window. Members of the media can contact Richard Noonan for a copy on (61) 3 9631 2152 or richard_noonan@standardandpoors.com.