Belgian lender markets €637m “all sums” mortgages

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Bank Nagelmackers NV/SA, a subsidiary of one of the largest insurance groups in China, is issuing its fourth securitization of well-seasoned Belgium residential mortgages with a pool of €637.5 million in mortgages to 5,689 prime borrowers.

The receivables from B-Arena NV/SA Compartment No.4 are from first-lien “all sums” mortgage loans that, according to Moody’s Investors Service, constitute term advances under a credit facility under Belgian rules.

The deal has two Class A structures – a €255 million Class A1 tranche priced at three-month Euribor plus 30 basis points, and a €294.5 million Class A2 notes series with a slightly higher coupon at 45 basis points over Euribor. Both senior note structures have 15% credit enhancement with final AAA ratings.

The loans’ weighted average seasoning is 7.6 years, with 15.21 years remaining on the term loans.

Moody’s, which estimates an expected cumulative loss of 0.9%, said the transaction is exposed to interest-rate risk, with the portfolio comprised of fixed-rate loans and the notes issued with coupons linked to Euribor. The deal lacks of a swap providing a guaranteed excess spread (currently assumed at 1.93% by Moody’s), as is common in many Belgian asset-backed deals.

The credit enhancement partly mitigates that concern, as does an interest rate cap on the Class A notes until the first optional redemption rate of October 2022, when a step-up rate is to kick in for 32.07% of the pooled assets.

The loans, which were originated between 2004-2011, have current weighted average loan-to-value ratio of 55.14%.

None of the loans were in arrears at the cut-off date for the pool.

The pool includes “all sum” mortgage loans that secure additional loans that borrowers owe or will owe to the seller in the future as well as a “mortgage mandates”, both of which can weaken the security claims of on a mortgage.

Loans with attached “mortgage mandates” are only partially secured by the mortgage, and comprise 35% of the pool. Mandates are an irrevocable power of attorney, which creates a mortgage as a security; they are commonly used to reduce mortgage registration fees, according to Moody’s.

Bank Nagelmacker, owned by Anbang Insurance Group Co., has issued three prior securitization of Belgium residential mortgages. The lender is a small player in the Belgian mortgage market with less than a 2% share, and has experienced minimal accumulative defaults of between 0.5% and 2%. It will continue to service the loans in the transaction.

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