ABN AMRO is issuing another €2 billion of bonds out of its €36 billion-asset covered bond program, which is backed by Dutch residential mortgages.

ABN AMRO Mortgage Covered Bonds Programme 2 will market notes secured by nearly 190,000 mortgages held and serviced by the Amsterdam-based bank.

The loans were originated by a consortium of lenders in The Netherlands: ABN AMRO, ABN AMRO Hypotheken Groep, MoneYou B.V., Oosteroever Hypotheken B.V. and Quion 9 B.V., according to Moody’s Investors Service.

Covered bonds are supported by principal and interest payments of the mortgages, and are the means by which most European banks fund mortgages, as opposed to securitization.

ABN AMRO’s latest offering carries a triple-A rating. That rating is tethered within one notch of the corporate credit rating for ABN AMRO (Aa3), a tie-in based on the fact the performance of the bonds rely on ABN AMRO’s performance as servicer and manager of the loans. ABN AMRO also has the option of adding loans to the asset pool (with potentially varying credit characteristics), and is subject to full recourse on the loans from investors.

The covered bonds are governed by Dutch law that requires that the nominal value of the pool collateral exceed the issued bonds level by 5% (which in the case of Programme 2 is well above the threshold, with an overcollateralization level of 1,650%).

As part of the covered bond program, ABN AMRO must maintain a six-month liquidity reserve backing the notes.

The weighted average indexed loan-to-value ratio is 73.02% for the pool of loans, which have a weighted average seasoning of 54 months. More than 98% of the loans are fixed-rate prime loans with none currently in arrears.

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