Liberty Series 2026-2 Trust wins expected AAA ratings on Australian RMBS notes

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Liberty Trust AAA ratings

Highlights

Liberty Series 2026-2 Trust's class A1a, A1b, and A2 Australian RMBS notes received AAA(EXP)sf ratings from Fitch, supported by strong credit enhancement and a AUD1.0 billion collateral pool.
The portfolio features 24.2% self-employed borrowers, 14.2% low-doc loans, and 27.5% investment loans, with a 1.1x originator adjustment applied to 49.8% of loans due to non-standard serviceability assessment.
Australia's economic backdrop features 2.1% GDP growth to June 2026 and a 4.6% unemployment rate, supporting robust pool performance outlook according to Fitch.

Expected ratings and transaction structure

As reported by Fitch Ratings, Liberty Series 2026-2 Trust's mortgage-backed pass-through floating-rate bonds have received expected ratings, with the class A1a, A1b and A2 notes assigned AAA(EXP)sf and the class B through G notes assigned NR(EXP)sf.

The notes are due to be issued by Liberty Funding Pty Limited in its capacity as issuer of the trust, which operates as a separate and distinct vehicle under a master trust deed. The collateral pool totals AUD1.0 billion at the 10 September 2026 cut-off date and includes 1,570 obligors, with a weighted-average current loan-to-value ratio of 63.9% and a weighted-average indexed current loan-to-value ratio of 63.2%.

Fitch says the senior ratings are supported by credit enhancement that mitigates expected AAAsf losses, while liquidity risk is limited by a facility sized at 1.5% of the note balance, subject to a floor of AUD1,000,000. A guarantee fee reserve, funded by excess available income and capped at 0.3% of the initial note balance, is also available to cover losses and required payment shortfalls.

Portfolio risks and market support

Fitch says the portfolio's credit profile is shaped by self-employed borrowers accounting for 24.2% of the pool, low-documentation loans at 14.2%, self-managed superannuation fund loans at 10.0%, investment loans at 27.5% and non-conforming mortgages at 5.6%. The agency also applies a 1.1x originator adjustment to 49.8% of the portfolio because the serviceability assessment on that subset differs from what it views as a standard non-bank assessment rate.

The ratings agency says Liberty's origination, servicing and portfolio management operations are mostly comparable with market standards following its operational review. It adds that the transaction supports lenders' mortgage insurance-independent ratings for the class A1a, A1b and A2 notes because the lower notes provide sufficient credit enhancement.

Fitch says Australia's continued economic growth and tight labour market support the outlook for the pool. GDP growth stands at 2.1% in the year to June 2026, unemployment is 4.6% in August 2026, and Fitch forecasts GDP growth of 2.0% in both 2027 and 2028, with unemployment at 4.6% and 4.7% respectively.

In our earlier article on StrideUp Homes’ Meridian Funding 2026-1 PLC, we covered Fitch’s expected ratings across multiple note classes and the key structural features of the UK home purchase plan securitisation. We noted the prefunding mechanism, portfolio mix (owner-occupied versus buy-to-let) and the agency’s adjustments and stress sensitivities tied to limited performance history and potential downside scenarios.

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