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Fitch affirms Korea ACE Mortgage class A notes at 'AAAsf'/stable

Dec 6 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has today affirmed the class A notes issued by Korea ACE Mortgage Company (Korea ACE). The transaction is a RMBS securitisation backed by South Korean residential mortgages originated by Citibank Korea Inc. (A-/Stable/F1).

USD26.9m Class A floating-rate secured notes due 2038 affirmed at 'AAAsf'; Outlook Stable


The affirmation reflects the sound collateral performance and further build-up of credit enhancement (CE) to 55% as of December 2013, from 12.5% at closing in June 2008. Fitch expects continued amortisation of the portfolio to further bolster CE, supporting the Stable Outlook.

The agency also expects the stable employment market in South Korea to support households' mortgage payments despite high household leverage. In Fitch's view, the low loan-to-value (LTV) ratio of Korea ACE's portfolio (37% as of October 2013) provides a strong incentive for borrowers to continue servicing mortgage payments. The absence of interest-only loans also renders the portfolio more resilient to stress.

Delinquency and foreclosure rates in Korea ACE's portfolio remain low. The three-month average delinquent mortgage loan ratio, which covers loans between 60-89 days past due, was 0.05% at end-October 2013, well below the transaction's trigger at 2.75%. Loans under foreclosure were less than 0.1% of the outstanding pool balance. There have been no losses resulting from defaults due to the low LTV ratio, which has supported full recoveries.

The note balance as of December 2013 was at 11.8% of the initial balance at closing.


Fitch considers the likelihood of a downgrade as remote, based on the transaction's performance. Assuming the Fitch weighted average 'AAAsf' loss severity doubled to 72% and if other factors remained constant, the 'AAAsf' rating may face downgrade pressure if the default rate increased to above 64%. This sensitivity does not consider any further increase in CE as the transaction continues to season.