Rams Home Loans, a specialty mortgage lender, has launched Rams Funding Three LLC and Rams Funding Proprietary Ltd., both of which will issue secured liquidity notes (SLNs).

The Sydney, Australia-based lender is sponsoring the programs after closing out Rams Funding, which began trading in April 2005 and fully repaid its notes in 2006. The new pair of conduits will jointly issue SLNs that will, in turn, purchase other notes issued from Rams Mortgage Securities (RMS) Proprietary Ltd., specifically in its capacity as trustee for Rams Mortgage Securities Trust. The SLNs will, essentially, provide the latter with term mortgage financing, according to Moody's Investors Service.

The programs will be authorized to issue up to $6 billion in SLNs, according to Standard & Poor's. SLNs are a form of ABCP that have final maturity dates that can be extended. In this case, SLNs issued by the two Rams Funding programs will have an original term of up to 90 days, and the issuer has the option of extending the notes to an additional 180 days, Moody's said. Moody's and S&P gave the two programs joint P-1'/'A-1+' ratings, in part because the extendible maturities will aid liquidity. The ratings are also based on the liquidation process and market value arrangements of the notes from Rams Mortgage Securities, which will be the underlying assets backing the SLNs.

Unless the conduit can issue enough SLNs to repay extended notes, then collateral must be sold by the final legal maturity date of the RMS notes. To facilitate this, RMS has struck a market value option agreement with ABN Amro Bank. If necessary, the bank will pay the lesser amount between the sum of the total outstanding balance, plus interest, of all RMS' performing mortgage loans, and the difference between the aggregate Australian dollar amounts payable under each currency swap agreement outstanding on the final maturity date (which includes any outstanding foreign exchange loans) and the total value of all authorized investments held by RMS for the series. ABN Amro's market value option obligations might change, depending on the structure and types of counterparties associated with different series of notes that will be added to the program over time, Moody's said.

As for credit enhancement, the SLNs' underlying mortgage assets are insured for 100% of their principal amount, according to Moody's. Also, the programs will issue subordinated notes equal to 0.05% of the authorized amount, at least initially. Additional subordinated notes can be issued if any mortgage insurer falls below Aa3'.

"Rams sees the extendible market to be an exciting market that continues to grow," Glenn Goddard, treasurer of Rams, said via email. He added that Rams Two will continue to function, although it was wound back slightly. "Series 3 ... allows, with appropriate approvals, the ability to have multiple market value derivatives attached to discrete pools of prime Australian mortgages."

Aside from the recently structured programs and RMS, Rams Home Loans sponsors Rams Funding Two, which is authorized to issue up to $5 billion in ABCP, according to the Moody's ABCP Index.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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