Losses rise on sub-prime loans

Fitch downgraded NZ$19.6 million of notes issued by Rated Mortgage RML 2006-2 Trust to BB- from BB and left the rating with a negative outlook. The downgrade and negative outlook reflect the recent downgrade of one of the underlying notes from a securitisation program established by Propertyfinance Securities Limited.

The rating downgrade comes as a result of the deteriorating performance of the underlying portfolio of non-conforming residential mortgages and declining subordination available to the underlying note held by RML 2006-2, as well as Fitch's negative view on the New Zealand economy. At the same time, Fitch affirmed the 'BB+/Negative' rating on notes issued by Rated Mortgage CM 2006-1 Trust.

Fitch separately upgraded the Class C and D notes issued by Liberty Series 2007-1 Auto Trust to A- and BBB- from BBB+ and BB, respectively. At the same time it upgraded the Class B notes issued by Liberty Series 2006-1 Auto Trust to 'A+' from A.

Both transactions have had sufficient excess to cover all losses incurred to date, and this is expected to continue, with additional support provided by liquidity and credit reserves. Arrears for both transactions peaked in early 2008 and have mostly remained flat or fallen since then.