Fitch Ratings has affirmed the ratings on the class A3 and class B notes of Jiamei 2016-1 Residential Mortgage-Backed Securities at 'A+sf'.

The Outlook is Stable.

The transaction consists of notes backed by a pool of first-lien Chinese residential mortgage loans originated by Postal Savings Bank of China Co., Ltd. (PSBC, A+/Stable/F1+).

RATING ACTIONS

Entity / Debt

Rating

Prior

Jiamei 2016-1 Residential Mortgage-Backed Securities

A3 CNM100002T22

LT

A+sf

Affirmed

A+sf

B CNM100002T30

LT

A+sf

Affirmed

A+sf

Page

of 1

VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Asset Performance Better Than Expected (Positive): Delinquency and annualised gross loss performance were better than or comparable to Fitch's China RMBS index. As of November 2023, the cumulative default rate stood at 0.42% (89 months since closing), well below Fitch's initial base case of 2.5%. Meanwhile, there has not been any material change in loan characteristics since closing.

Sufficient Credit Enhancement (Positive): Credit enhancement (CE) of the rated notes, through amoritsation and overcollateralisation, has built up quickly due to the sequential turbo repayment structure. As of the December 2023 payment date, the CE for the class A3 and B notes increased to 87.4% and 71.4%, respectively, from 13.3% and 9.2%, respectively, at closing.

The risk arising from the interest rate mismatch between the underlying mortgages and the notes is mitigated by the sufficient CE of the notes. Asset and cash flow modelling were not performed for this review because the notes have passed the highest model-implied rating at the transaction's rating cap.

Neutral Asset Outlook (Neutral): Fitch expects a steady performance for China RMBS, supported by stable unemployment forecasts despite slower GDP growth. Fitch's 2024 GDP growth forecast for China is 4.6%, slowing from the actual 5.2% in 2023.

Fitch expects overall home prices to fall by 5%-7% in 2024. However, we think the impact on RMBS asset performance will be mild and likely to be offset by benefits that RMBS receive from rate cuts on existing residential mortgages.

Experienced Originator and Servicer (Positive): The originator and servicer, PSBC, is one of the biggest state-owned commercial banks in China. Fitch believes PSBC is a capable originator and servicer due to its long operating history and record of underwriting and servicing, which is evident from its portfolio delinquency and loss experience. Its reported non-performing loan ratio for its residential mortgage book was 0.50% as of June 2023. A servicer review in January 2024 concluded that there have not been any material changes that may affect PSBC's ability to undertake administration and collection activities.

Rating Capped (Negative): The 'A+sf' cap on Jiamei 2016-1 is primarily due to the account bank replacement rating threshold, which can only support an 'A' category note rating.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Downgrades may occur if the build-up of the notes' CE does not compensate for a much worse loss expectation than we anticipate due to unexpected high levels of defaults and portfolio deterioration.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

The likelihood of a rating upgrade for both the class A3 and class B notes is low as we have capped the rating at 'A+sf' primarily due to the account bank replacement rating threshold, which can only support an 'A' category note rating.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Prior to the transaction closing, Fitch reviewed the results of a third-party assessment conducted on the asset portfolio information and concluded that there were no findings that affected the rating analysis.

Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.

Overall, and together with any assumptions referred to above, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

Additional information is available on www.fitchratings.com

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