S&P GLOBAL RATINGS yesterday raised its ratings on 37 classes of Australian nonconforming and prime residential mortgage-backed securities transactions sponsored by Pepper HomeLoans Pty Ltd. At the same time, S&P affirmed its ratings on 59 classes of notes.

It also removed 60 of these ratings from under criteria observation.

Theserating actions follow S&P’s review of these RMBS transactions “when applying our updated methodology and assumptions for assessing pools of Australian residential loans.

“The transactions have adequate credit support and cash flows at the respective rating levels, after applying the updated criteria, which include a revised method of assessing loan-to-value, the application of changing house price values in determining default frequency and loss severity, and an estimate of house price overvaluation (OUV) of 22%. 

“The OUV measure is intended to reflect how much a market is above or below a longer-term measure of price to income.

Some ratings are constrained below the level that cash flows alone support due to other risk considerations such as sensitivities to the outlook for yield, arrears, pool concentrations, and absolute size of credit support."