Banco Santander is preparing another securitization of high leveraged, prime residential Spanish mortgages via its Fondo de Titulizacion de Activos trust.

The deal, Santander 4, is backed by a €3.09 billion ($3.4 billion) pool of loans with a weighted average loan to value ratio of 103%.

The previous deals issued from this program, the last one completed in November,have been retained by the issuer.   

Santander 4 is structured with  €2.36 billion of ‘A+’ rated class A notes that benefit from 25% credit enhancement; €590 million of ‘CCC’ rated, class B notes that benefit from 5% credit enhancement; and €147.5 million of class C notes rated ‘CC’.  All of the notes are due September 2063.

These loans aren’t just highly leveraged; some of the borrowers have spotty credit. The collateral pool includes a high percentage (20.6%) of modified mortgage loans and loans have been in arrears at some point in the last 12 months (33.81%).

However S&P said that the pool is well seasoned, seven years on average. Loans that have a longer payment history tend to exhibit lower risk profiles than loans with shorter payment history.

All of the loans in the pool are floating rate, but S&P stated in the presale that up to 5% of the borrowers in the pool have the option to switch to fixed-rate terms.  As a result, the rating agency is rating the deal as if 5% of the pool is fixed rate.

Since the financial crisis, most newly issued Spanish RMBS has been retained on banks’ balance sheets. That’s what Santander did with the €7.5 billion of notes from its previous securitization of high LTV Spanish mortgages, Santander 3, last November.

However the Santander led  Union de Creditos Inmobiliarios’ (UCI) RMBS called Prado I, issued earlier this month, was placed with investors.  UCI is a credit institution jointly owned by BNP Paribas and Santander.

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