IDOL Trust. Preliminary Ratings As Of May 22, 2017

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1 Presale: IDOL Trust This presale report is based on information as of May 22, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings As Of May 22, 2017 Class Preliminary rating Preliminary amount (mil. A$) Credit support before credit is given to mortgage insurance (%) Credit support after credit is given to mortgage insurance (%) Credit support provided (%) A AAA(sf) 460,000, AB AAA (sf) 22,850, B AA (sf) 7,600, C A (sf) 4,700, D BBB+ (sf) 1,750, E NR 3,100,000 N/A N/A N/A Note: The rating on each class of securities is preliminary and subject to change at any time. NR--Not rated. N/A--Not applicable. Profile Expected closing date June 2017 Expected final maturity date Collateral Structure type Issuer Trust manager and servicer The payment date in May 2048 Fully amortizing and interest-only, reverting to fully amortizing Australian-dollar loans to prime-quality borrowers, maturing no later than 18 months before the final maturity date, secured by first-registered mortgages over Australian residential properties Prime residential mortgage-backed pass-through securities Perpetual Corporate Trust Ltd. as trustee of the IDOL Trust ING Bank (Australia) Ltd. Primary Credit Analyst: Paul Prajogo, Melbourne (61) ; paul.prajogo@spglobal.com Secondary Contact: Luke Elder, Melbourne (61) ; luke.elder@standardandpoors.com See complete contact list on last page(s) MAY 21,

2 Profile (cont.) Security trustee Primary credit enhancement P.T. Ltd Note subordination, lenders' mortgage insurance on 23.9% of the loans in the portfolio and excess spread, if any. Lenders' mortgage insurance covers 100% of the principal balance on the insured loans, plus accrued interest and reasonable costs of enforcement (see "Reliance On Lenders' Mortgage Insurance"). Supporting Ratings Lenders' mortgage insurers Interest-rate swap provider Liquidity facility provider Bank account provider Genworth Financial Mortgage Insurance Pty Ltd. ING Bank N.V (Sydney Branch) ING Bank (Australia) Ltd. ING Bank N.V (Sydney Branch) Loan Pool Statistics As Of March 31, 2017 Total number of loans 1,422 Total value of loans (A$) 499,965,925 Current maximum loan size (A$) 944,743 Average loan size (A$) 351,593 Maximum current loan-to-value (LTV) ratio (%) 89.8 Weighted-average current LTV ratio (%) 58.9 Weighted-average loan seasoning (months) 19.8 Note: All portfolio statistics are calculated on a consolidated loan basis. Rationale The preliminary ratings assigned to the prime floating-rate residential mortgage-backed securities (RMBS) issued by Perpetual Corporate Trust Ltd. as trustee of the IDOL Trust reflect the following factors. The credit risk of the underlying collateral portfolio (discussed in more detail under "Credit Assessment") and the credit support provided to each class of notes are commensurate with the ratings assigned. Credit support is provided by subordination and lenders' mortgage insurance (LMI) cover. The assessment of credit risk takes into account the underwriting standards and approval process of ING Bank (Australia) Ltd. (ING Bank Australia), which are consistent with industry-wide practices; the servicing quality of ING Bank Australia (discussed in more detail under "Origination And Servicing"); and the support provided by the LMI policies on 23.9% of the loans in the portfolio (see "Reliance on Lenders' Mortgage Insurance"). The LMI policies on the insured loans provide 100% cover for the outstanding principal of each insured loan, accrued interest, and reasonable selling costs. The notes can meet timely payment of interest, and ultimate payment of principal under the rating stresses. Key rating factors are the level of subordination provided, the LMI cover, the interest-rate swap, the principal draw function, the provision of a liquidity facility, and the provision of an extraordinary expenses reserve--fully funded by ING Bank Australia at closing to cover extraordinary expenses--sized at a level consistent with the ratings. Our analysis is on the basis that the notes are fully redeemed by their legal final maturity date and we do not assume the notes are called at or beyond the call-option date. MAY 21,

3 Our ratings also take into account the counterparty exposure to ING Bank N.V. (Sydney branch) (ING Bank) as interest-rate swap provider. Some 11.2% of the portfolio comprises loans for which the interest rate is fixed for up to five years. An interest-rate swap will be provided by ING Bank to hedge the mismatch between the fixed-rate receipts on the fixed-rate loans and the floating-rate interest payable on the notes (discussed in more details under "Interest-Rate Risk"). This counterparty exposure meets S&P Global Ratings' counterparty criteria. We also have factored into our ratings the legal structure of the trust, which has been established as a special-purpose entity and meets our criteria for insolvency remoteness. Strengths And Weaknesses Strengths The strengths of the transaction observed in the rating analysis are: For the class A notes, the 8.0% credit support provided by note subordination exceeds S&P Global Ratings' credit enhancement at the 'AAA' rating level, both before and after credit is given to LMI. For the class AB, class B, class C, and class D notes, the credit support provided by the subordination of notes that ranks below them in seniority exceeds S&P Global Ratings' credit support at the 'AAA', 'AA', 'A', and 'BBB+' level after credit is given to LMI, providing a buffer for a one-notch downgrade on either of the insurers. The pool contains 84.2% of loans with a current loan-to-value (LTV) ratio of less than or equal to 75%, with a weighted-average current LTV ratio of 58.9%. S&P Global Ratings recognizes that the more equity that borrowers have in their property, the less likely they are to default. This factor is reflected in the credit analysis. Weaknesses The main weaknesses identified with respect to the transaction are: Yield strain will occur in this transaction because the weighted-average coupon payable on the notes increases as the senior notes repay. In our cash-flow analysis, we considered the impact on the cash flow of the interest-rate swaps in place. Approximately 62.6% of the portfolio consists of loans made to refinance existing debt. When the refinancing involves debt consolidation or cash or equity take-out, we assume the default frequency on these loans is higher to reflect the situation in which a borrowing is against the build up of equity in a property because we believe this increases the likelihood of default by the borrower. Notable Features Issuance of class A-R notes The trust manager may redeem all, but not some only, of the class A notes on each payment date starting from July 2024 (the class A refinancing date), with the issuance of class A-R notes. If the class A-R notes are not issued, then the class A notes will continue to amortize until the legal final maturity date with the initial issuance margin. If the class A-R notes are issued, then the margin on the class A-R notes must not be more than the class A notes' margin on closing. The trust may only issue class A-R notes with an initial invested amount equal to the outstanding balance of the class A notes. The proceeds of class A-R notes may only be used to repay the class A notes. If the class A or class A-R notes are not redeemed on the call option date, then a step-up margin will apply to those notes. MAY 21,

4 We will not assign a rating on the class A-R notes on closing because the class A refinancing date only starts seven years after closing. Issuance of class AB-R, class B-R, class C-R, class D-R, and class E-R notes The trust manager can redeem all of each class, but not some only, of the class AB, class B, class C, class D, and class E notes (each a "subordinate note") on any payment date starting from the closing date, with the issuance of a corresponding class AB-R, class B-R, class C-R, class D-R, and class E-R notes (each a "subordinate refinance note"). If a subordinate refinance note is not issued, then the subordinate note will continue to amortize until the legal final maturity date. If issued, then the margin on a subordinate refinance note must not be more than the margin of the relevant subordinate note on closing. If the class AB or class AB-R notes are not redeemed on the call option date, then a step-up margin will apply to those notes. All other subordinate notes or subordinate refinance notes do not have a step-up margin applicable. The trust may only issue a subordinate refinance note with an initial invested amount equal to the outstanding balance of the relevant subordinate note. The proceeds from the issuance of a subordinate refinance note may only be used to repay the relevant subordinate note. Class B (or class B-R), class C (or class C-R), and class D (or class D-R) notes Although the transaction documents allow the class B, class C, and class D notes' interest to be paid on the stated amount of the notes, our analysis shows that in a 'AA (sf)' environment with respect to the class B notes, a 'A (sf)' environment with respect to the class C notes, and a 'BBB+ (sf)' environment with respect to the class D notes, the stated amount of class B notes, C notes, and class D notes will always equal the notes' respective invested amounts. Therefore, we have modeled in our cash-flow analysis the payment of the class B, class C, and class D notes' interest on the invested amount. Our cash-flow analysis shows that the notes' interest can be paid in full under the relevant stresses commensurate with the rating on the notes. Transaction Structure The structure of the transaction is shown in chart 1. MAY 21,

5 Chart 1 We understand that transaction counsel will lodge the relevant financing statements on the Personal Property Securities Register in connection with the security interest. Note Terms And Conditions Interest payments All classes of notes are rated on a "timely interest, ultimate principal" basis. The notes are floating-rate, pass-through securities, paying a margin over the one-month bank-bill swap rate. Interest on the class A and class AB notes will be payable based on the invested amount of the notes. However, the interest on the class B, class C, and class D notes will be payable based on their stated amounts (see "Notable Features: Class B (or class B-R), class C (or class C-R), and class D (or class D-R) notes"). Interest payments are made sequentially to each class of notes, where coupon to the unrated class E bondholders ranks subordinated below reimbursement of charge offs. If the notes are not called on the call-option date, then the margin on the class A (or class A-R) notes and class AB (or class AB-R) notes will increase by MAY 21,

6 0.25%. The trustee may elect to call the notes in full on or after the date on which the outstanding mortgage loan balance of all loans is less than or equal to 10% of the aggregate initial mortgage loan balance. Given the pass-through nature of the notes, the actual date on which the principal amount of the notes will be fully repaid will be determined by the actual prepayment rate experience on the loan portfolio. As a result, the risk of mortgage prepayments is borne by the noteholders. Principal allocation All notes have a legal final maturity on the payment date occurring in May Principal paydown for these notes can follow a pro-rata or sequential paydown structure, depending on certain pro-rata triggers (see "Pro-rata paydown triggers"). Chart 2 shows the annualized prepayment speeds of the ING Bank Australia securitized loan portfolios against Standard & Poor's Prepayment Index (SPPI), which is a measure of prepayment rates for Australian prime RMBS. The prepayment speeds encompass the unscheduled principal payments on the mortgage loans. Chart 2 MAY 21,

7 Loss allocation Charge offs will be first allocated to the class E notes until their outstanding balance is reduced to zero, followed by the class D, class C, class B, class AB, then class A notes. Under the transaction structure, any charge offs are to be reimbursed in the reverse order. Pro-rata paydown triggers Principal repayments will occur sequentially from day one; however, if specific tests are met, then principal repayments can occur on a pro-rata basis to the class AB, class B, class C, class D, and class E notes. The triggers to allow pro-rata paydown are: The payment date is at least two years after transaction close. Subordination available to the class A notes provided by the class AB, class B, class C, class D, and class E notes must not be less than 18.0%. There are no carryover charge offs to the class E notes. Average arrears greater than 60 days must not exceed 4% of the average aggregate outstanding loan amounts during the previous three months. The call date has not yet occurred. If these specific tests are breached at any time during the life of the transaction, then the allocation of principal receipts must revert to a sequential allocation. Reliance On Lenders' Mortgage Insurance Approximately 23.9% of the mortgage loans within the pool will be insured by either a primary or pool LMI policy provided by a mortgage insurer that has an insurer financial strength rating of at least 'A+'. The policies cover the outstanding mortgage loan principal, accrued interest, and any reasonable enforcement expenses on the defaulted loans. The rights under the primary LMI policies will be assigned to the trustee on the closing date. The policies contain terms and conditions that allow the insurer to reduce or deny a claim in certain circumstances. If a claim is reduced and results in a loss to the trust, then the issuer may be able to offset that loss by applying excess spread to cover those losses before making any distribution to beneficiaries. Under our "Methodology For Assessing Mortgage Insurance And Similar Guarantees And Supports In Structured And Public Sector Finance And Covered Bonds" criteria, published on Dec. 7, 2014, the overall amount of credit given to LMI is the product of the stated coverage of the LMI policy, the insurer's estimated capacity to pay for a given rating scenario, and the estimated claims payout ratio for a given issuer. To adjust for the insurer's capacity to pay, S&P Global Ratings will look to the LMI provider's issuer credit rating. When sizing the credit support for the 'AAA (sf)' rated notes, S&P Global Ratings assumes that 45% of claims to 'A+' rated LMI providers will be denied in full. In addition, the estimated claims payout ratio reflects the categorization of ING Bank Australia into CA1 due to a minimal level of claims adjustments, clearly documented servicing practices, and detailed procedures adhering to LMI MAY 21,

8 policies and procedures. The claims adjustment rate for CA1 is 10%. Rating-Transition Analysis Scenario analysis: Lenders' mortgage insurance The principal rating-transition risk in most Australian prime RMBS transactions is a downward transition in the rating on one or more of the lenders' mortgage insurers. We consider the rating-transition risk for the 'AAA (sf)' rating on the class A notes to be low because the credit support from the subordinated notes exceeds the 'AAA (sf)' level of credit support without credit to LMI and provides a degree of protection should the ratings on the LMI providers be lowered. Given the level of credit support provided to the class A notes from day one, they are independent from the ratings on the LMI, assuming no deterioration in the asset pool. We consider the rating-transition risk to be moderate for the 'AAA (sf)' rating on the class AB notes and the 'AA (sf)' rating on the class B notes because the credit support from the subordination of the notes that ranks below them in seniority marginally exceeds the 'AAA (sf)' and 'AA (sf)' level of credit support after credit is given to LMI and provides a degree of protection if we lower our ratings on the LMI providers. However, given the level of credit support provided to the class AB and class B notes from day one, they are not independent from the ratings on the lenders' mortgage insurers. The ratings on the class C and class D notes are unlikely to be affected by a one-notch downgrade on either of the insurers, all else remaining equal. However, these notes are likely to be affected if no credit is given to LMI. If the step-down tests are not satisfied and principal repayments are made on a sequential basis, as the collateral portfolio amortizes, the proportion of subordination relative to the senior notes increases, and the class AB, class B, class C, and class D notes' reliance on the lenders' mortgage insurers will decrease. Assuming there is no deterioration in the credit quality and performance of the portfolio, table 1 details the level of subordination that would support a 'AAA (sf)' rating on the class AB notes, a 'AA (sf)' rating on the class B notes, an 'A (sf)' rating on the class C notes, and a 'BBB+ (sf)' rating on the class D notes, if we were to lower by one notch our ratings on Genworth Financial Mortgage Insurance Pty Ltd. (Genworth). It also details the hypothetical rating on the class AB, class B, class C, and class D notes if no additional support is provided. Table 1 Rating Sensitivity To Lowering Of Rating On Lenders' Mortgage Insurer Lenders' mortgage insurers (and ratings) subject to hypothetical downgrades Subordination required to support 'AAA (sf)' rating on class AB notes (%) Rating transition of class AB notes if no additional support were provided Genworth 'A' category 3.23 AAA No credit to lenders' mortgage insurers 4.00 AA+ Lenders' mortgage insurers (and ratings) subject to hypothetical downgrades Subordination required to support 'AA (sf)' rating on class B notes (%) Rating transition of class B notes if no additional support were provided Genworth 'A' category 1.72 AA MAY 21,

9 Table 1 Rating Sensitivity To Lowering Of Rating On Lenders' Mortgage Insurer (cont.) No credit to lenders' mortgage insurers 2.50 A+ Lenders' mortgage insurers (and ratings) subject to hypothetical downgrades Subordination required to support 'A (sf)' rating on class C notes (%) Rating transition of class C notes if no additional support were provided Genworth 'A' category 0.80 A No credit to lenders' mortgage insurers 1.50 BBB- Lenders' mortgage insurers (and ratings) subject to hypothetical joint downgrades Subordination required to support 'BBB+ (sf)' rating on class D notes (%) Rating transition of class D notes if no additional support were provided Genworth 'A' category 0.59 BBB+ No credit to lenders' mortgage insurers 1.17 BB We have factored the LMI principal cover into the cash-flow modeling through the loss-severity assumption, and we modeled the post-lmi loss severity for all classes of notes. The model shows that after recognizing this insurance cover, all principal will be paid to the rated notes under the relevant rating stresses. Among the other major factors that would drive us to lower our rating on this transaction are significant deterioration in asset portfolio performance, a lowering of our rating on ING Bank Australia as liquidity facility provider, or lowering our rating on ING Bank as interest-rate swap provider within the transaction. Scenario Analysis: Property market value decline We performed a scenario analysis to determine the impact on the ratings, assuming no credit to LMI, should property values decline by 10% during a short period of time. After adjusting down property values 10% and increasing LTV ratios for this impact, we applied our standard default frequency and loss-severity assumptions to arrive at the implied credit assessments in table 2. Table 2 shows the credit support and the implied credit assessment (credit only) should this scenario occur, and all else remained constant. The implied ratings are taking credit into consideration only, and do not consider any yield or liquidity issues that may be relevant at the time. Table 2 Credit Support And Implied Credit Assessments Under The Scenario Class Credit support pre-lmi (%) Implied credit assessment pre-lmi A 4.00 aaa AB 4.00 aa+ B 2.78 a C 1.71 bbb- D 1.17 bb LMI--Lenders' mortgage insurance. Origination And Servicing We assess the quality of the origination, underwriting, and servicing of the loans as part of our credit analysis because MAY 21,

10 it can affect the performance of the portfolio. ING Bank Australia, as seller and servicer, commenced mortgage-lending operations in Australia in ING Bank Australia has been a holder of an Australian banking license since 1999, and has developed a solid business franchise in savings and deposit products, commercial loans, and residential loans. Chart 3 shows ING Bank Australia's RMBS issuance history. Chart 3 ING Bank Australia sources its residential mortgage loans through three channels: accredited brokers, direct channels (predominantly via the internet), and its mortgage managers. ING Bank Australia retains all authority for approval of loans through the broker and direct channels, and these pass through an internally developed automated decision-making system. ING Bank Australia obtains a credit report from Veda Advantage Services and verifies employment and financial information. The loans originated through the mortgage-manager channel are subject to the same credit policy as the broker and direct channels. Although the mortgage managers have delegated lending authority, all information is internally verified by ING Bank Australia before the settlement of each loan. The mortgage loans assigned to IDOL Trust have been originated by ING Bank Australia in the normal course of business, and have been processed in line with the approved policies, procedures, and underwriting standards of the MAY 21,

11 seller. The ongoing servicing of the mortgage loans will be performed at ING Bank Australia's centralized facility in Sydney. The mortgages are serviced in accordance with ING Bank Australia's servicing procedures. ING Bank Australia, as the servicer, will also ensure a threshold-rate mechanism operates to enable rates on the mortgages to be set to cover amounts owed by the trust. ING Bank Australia measures arrears on a scheduled balance basis rather than the missed-payments arrears method. Under this arrears method, a mortgage loan is only deemed delinquent when the actual loan balance exceeds the scheduled balance. ING Bank Australia will contact a borrower for a failed direct debt and for missed payments; however, active management of arrears would not occur until the loan balance exceeds the scheduled balance. Chart 4 compares the level of arrears on the historical data of IDOL transactions with the aggregate level of arrears on mortgage loans collateralizing all rated RMBS transactions in Australia, as measured by Standard & Poor's Performance Index (SPIN) for Australian prime mortgages. Notwithstanding ING Bank Australia's measurement and management of arrears, the prime SPIN includes RMBS transactions that report arrears under the Australian arrears method and on a missed-payments basis. Chart 4 MAY 21,

12 Credit Assessment The portfolio consists entirely of full-documentation prime residential mortgage loans. This is a closed pool, which means no additional loans will be assigned to the trust after the closing date. S&P Global Ratings' credit assessment is based on the current balance of the loans. Borrowers can redraw prepaid principal amounts up to the scheduled balance of the loan. Further advances are not permitted. S&P Global Ratings has increased the minimum level of credit support for the transaction to reflect borrowers' ability to redraw on their loans. We have assessed the credit quality of the collateral to determine the minimum credit support levels for this transaction. In addition to the key collateral characteristics highlighted under "Strengths And Weaknesses," some of the characteristics that we have considered as strengths are the loan seasoning, loan term, and the predominance of loans for owner-occupied housing. Some of the weaknesses in the credit quality of the portfolio are the exposure to security properties in nonmetropolitan areas and some of the borrowers in the portfolio are likely to be first-home buyers. We have assumed that 10% of loans are to first-home buyers--10% is our standard assumption when no data are available--and increased the default frequency of borrowers on this portion of the portfolio. There is evidence that first-home buyers are more likely to default on their mortgages in the event of financial distress, given their lack of experience in managing large debt obligations. In calculating the minimum credit support levels, we compare the characteristics of the portfolio with an archetypical pool and apply multiples as a way to increase or decrease credit support levels to reflect higher or lower credit risk compared with the characteristics of the archetypical pool. The credit support levels comprise two components: default frequency and loss severity. (A summary of this calculation is shown in table 3.) Table 4 lists the five main default frequency characteristics that have deviated from the archetypical pool. Table 3 Summary Credit Analysis Total Loan Portfolio AAA (sf) AA (sf) A (sf) BBB+ (sf) (a) Default frequency (%) (b) Loss severity (%) (c) Credit support before lenders' mortgage insurance (LMI) (a) x (b) (%) (d) Credit to LMI (%) (e) Credit support after LMI (c) (d) (%) Assumptions Market value decline (%) Weighted-average recovery period (months) Interest rate through recovery period (%) Table 4 Rating Multiples Criteria Default frequency multiple (x) Loan purpose MAY 21,

13 Table 4 Rating Multiples (cont.) Criteria Default frequency multiple (x) Borrower employment Repayment method Loan-to-value ratio Loan term Loan Pool Profile The pool as of March 31, 2017, is summarized in table 5. All portfolio statistics are calculated on a consolidated loan basis. Table 5 Loan Pool Characteristics Value of loans (%) Current loan size distribution (A$) Less than or equal to 100, Greater than 100,000 and less than or equal to 200, Greater than 200,000 and less than or equal to 300, Greater than 300,000 and less than or equal to 400, Greater than 400,000 and less than or equal to 600, Greater than 600,000 and less than or equal to 800, Greater than 800,000 and less than or equal to 1,000, Greater than 1,000,000 and less than or equal to 1,500, Current loan-to-value ratio distribution (%) Less than or equal to Greater than 50 and less than or equal to Greater than 60 and less than or equal to Greater than 70 and less than or equal to Greater than 80 and less than or equal to Greater than 90 and less than or equal to Geographic distribution (by state) New South Wales and Australian Capital Territory 45.9 Victoria 28.5 Queensland 8.9 Western Australia 9.2 South Australia 6.7 Tasmania and Northern Territory 0.8 Geographic distribution (metro/nonmetropolitan) Inner-city 0.3 Metropolitan 89.2 Nonmetropolitan MAY 21,

14 Table 5 Loan Pool Characteristics (cont.) Value of loans (%) Seasoning Less than or equal to six months 0.0 Six months to one year years years years years 0.2 Greater than five years 1.6 Principal amortization Fully amortizing 89.0 Interest only for up to five years, reverting to fully amortizing 11.0 Mortgage insurers Genworth Financial Mortgage Insurance Pty Ltd Uninsured 76.1 Ownership type Owner-occupied 90.9 Investment 9.1 Employment status P-A-Y-E (full or part time) 93.5 Self-employed 6.5 Interest rate Fixed rate 11.2 Variable rate 88.8 Loan purpose Purchase (new or existing) 37.4 Refinance for equity takeout 62.6 Loan documentation Full documentation Cash-Flow Analysis Our cash-flow analysis shows that the transaction has sufficient income to support timely payment of interest and ultimate repayment of principal to the rated notes under various stress scenarios commensurate with the ratings assigned. Liquidity assessment Primary liquidity support to meet senior fees, expenses, and interest shortfalls on the rated notes is provided through the ability to draw on principal. If available income plus principal draw is insufficient, a liquidity facility provided by MAY 21,

15 ING Bank Australia is available. The liquidity facility will represent 1.4% of the initial aggregate amount of all the notes. This will amortize with the note balance, subject to a floor of A$700,000. The liquidity facility will be available to meet liquidity shortfalls and enables the issuer to make timely interest payments on each coupon payment date. In the event of a downgrade of the liquidity facility provider, the liquidity facility would be fully drawn, and the monies deposited into an account of an appropriately rated bank. The principal draw mechanism and liquidity facility draws will not be available to meet interest shortfalls on the class B, class C, and class D notes if at any time there is a charge off to these notes. Extraordinary expense reserve The provision of an extraordinary expense reserve of A$150,000 allows for any additional unforeseen extraordinary expenses, providing a buffer during potential periods of stress. This will be available from the closing date. Interest-rate risk Interest-rate risk between any fixed-rate mortgage loans and the floating-rate obligations on the notes is hedged via interest-rate swaps provided by ING Bank. All fixed-rate loans in the portfolio have a maximum fixed-rate period of five years. Any variable-rate loan that converts to fixed rate after close will be repurchased out of the trust. In addition, a basis swap is provided by ING Bank Australia to hedge the basis risk associated with all variable-rate mortgage loans and the floating-rate obligations under the notes. S&P Global Ratings is satisfied that the income received under the interest-rate swaps, and the use of the threshold-rate mechanism will ensure that there is sufficient yield for the trust to meet its obligations should the basis swap fall away. Offset reserve On the closing date of the transaction, ING Bank Australia will deposit an amount not less than 0.15% of the initial aggregate amount of all the notes into the offset reserve. Some of the mortgage loans have an existing offset arrangement, whereby interest earned on a borrower's mortgage loan account is offset against the interest that ING Bank Australia pays on the same borrower's deposit account. The transaction documents require ING Bank Australia to pay such offset amount to the trustee before each payment date. If there is any shortfall in the offset amount that ING Bank Australia may owe to the trustee on each payment date, this reserve will be made available to meet such shortfalls. Cash-flow modeling assumptions Based on our cash-flow analysis and stresses, the notes can make full interest and principal payment by the final legal maturity date. Our cash-flow analysis allows us to test the capacity of the transaction's cash flow to support the rated notes under various stress scenarios, repay principal on the notes by their respective legal final maturity dates, and to determine the sufficiency of the liquidity support, which includes the use of principal draws and a liquidity facility, is sufficient. The key rating stresses and assumptions modeled at each rating level are: MAY 21,

16 Analyzing and modeling the structure of the transaction to include all note balances and margins, trust expenses, liquidity mechanisms within the structure, the priority of payments for income and principal, and the loss mechanism, as described in the transaction documents. Default frequency and loss severity commensurate with the ratings on the notes. Timing of defaults. S&P Global Ratings assumes most defaults would likely occur within the first few years of the transaction. We have run three default curve assumptions: a front-end default curve whereby most of the expected losses occur earlier in the first few years of the transaction's life, a base-case default curve, and a back-end default curve whereby losses occur later within the first five years of the transaction's life (table 6). Time to recovery of sale proceeds from defaulted loans. A key driver in the cash-flow model is the time it takes to foreclose and recover monies from the defaulted borrower. We have assumed a recovery period of 14 months. Loan prepayment rates. S&P Global Ratings has considered various prepayment rates when modeling the cash flows of the underlying mortgage loans to assess the impact on the ability of the trust to meet its obligations. S&P Global Ratings has modeled a low, constant, and high prepayment rate. The prepayment stresses assumed are shown in table 7. These rates include voluntary and involuntary (default) prepayments. Modeling the cash flows of the assets based on the characteristics of the underlying collateral pool, and the effects of the interest-rate swap and basis swap. Interest rates, by varying the bank bill swap rate curves at each rating level. An assumed servicer fee of 0.35%, should it be necessary for ING Bank Australia to be replaced as servicer. Sequential and pro-rata principal payment structures of the notes. Table 6 Assumed Default Curves Month Front-end default curve (%) Back-end default curve (%) Base-case default curve (%) Table 7 Assumed Constant Prepayment Rates (CPR) Transaction seasoning Low CPR scenario (% per year) Constant CPR scenario (% per year) High CPR (% per year) Up to month Month 13 to month Month 19 to month After month Note: Total CPR shown is inclusive of voluntary and involuntary (defaults) prepayments. Legal And Counterparty Risks In our view, the issuer has features consistent with our criteria on special-purpose entities, including the restriction on MAY 21,

17 objects and powers, debt limitations, independence, and separateness. The transaction will have counterparty exposure to ING Bank as an interest-rate swap provider and bank account provider, as well as to ING Bank Australia as liquidity facility provider. The documentation of these roles requires replacement and posting of collateral if the rating of these entities falls below certain levels. These mechanisms are consistent with S&P Global Ratings' counterparty rating criteria. Issuer Disclosure The issuer has informed Standard & Poor's (Australia) Pty Ltd. that the issuer will be publically disclosing all relevant information about the structured finance instruments that are subject to this rating report. Related Criteria And Research Related Criteria Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017 Methodology For Assessing Mortgage Insurance And Similar Guarantees And Supports In Structured And Public Sector Finance And Covered Bonds, Dec. 7, 2014 Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014 Australian RMBS Postcode Classification Assumptions, July 10, 2013 Counterparty Risk Framework Methodology And Assumptions, June 25, 2013 Structured Finance - General: Global Derivative Agreement Criteria, June 24, 2013 Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Australian RMBS Rating Methodology And Assumptions, Sept. 1, 2011 Methodology And Assumptions For Analyzing The Cash Flow And Payment Structures Of Australian and New Zealand RMBS, June 2, 2010 Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Related Research Australia And New Zealand Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, April 17, Outlook Assumptions For The Australian Residential Mortgage Market, Jan. 30, 2017 Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016 An Overview Of Australia's Housing Market And Residential Mortgage-Backed Securities, May 30, 2016 Industry Economic And Ratings Outlook: Australian RMBS Fundamentals Reflect A Stable Economic Environment, Sept. 30, 2014 RMBS Performance Watch: Australia, published quarterly RMBS Arrears Statistics: Australia, published monthly Australian Securitization News, published monthly Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services licence number under the Corporations Act Standard & Poor's credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act). MAY 21,

18 Analytical Team Primary Credit Analyst: Paul Prajogo, Melbourne (61) ; Secondary Contact: Luke Elder, Melbourne (61) ; MAY 21,

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