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Belmont Green preps 2nd, as-yet-unsized U.K. non-prime RMBS

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Fledgling U.K. mortgage lender Belmont Green Finance Ltd. is preparing its second offering of bonds backed by predominantly first-lien “buy-to-let” investor mortgages in its second-ever securitization of originations.

The size of the offering, dubbed Tower Bridge Funding No. 2 PLC, has yet to be determined. However the collateral will total at least £370.4 million (US$424.5 million), including a £62.7 million prefunding account.

The trust will issue five classes of term notes, including a Class A tranche with preliminary triple-A ratings from DBRS and Moody’s Investors Service. The Class A notes will represent 82.5% of the collateral pool and are supported by 20% credit enhancement. The Class B notes taking up 5.75% of the notes’ final balance are rated AA (high) by DBRS and Aa2 by Moody’s with 14.25% credit enhancement, while the A/A1 rated Class C notes making up 4.5% of the pool have 9.75% credit enhancement.

The BBB (high)/Baa2-rated Class D notes’ face value will be 2.75% of the final pool and the Class E notes – BBB (low) and Ba2 – will be 2%.

The capital stack also includes three subordinate tranches of interest-only notes which are unrated.

The weighted-average coupon of the mortgages in the pool is 4%, according to DBRS.

The notes are backed by 1,639 mortgages with an average balance of £208,981, with a weighted average seasoning of 0.2 years. The loans in the pool have a weighted-average current loan-to-value ratio of 69.2%.

Nearly 69% of the collateral is the buy-to-let loan variety, which contributes to the high concentration (70.8%) of interest-only loans in the pool. (Buy-to-let mortgages typically have interest-only terms, DBRS noted.) About 55.5% of the portfolio consists of buy-to-let borrowers with multiple properties. Ninety percent of the loans are fixed-rate.

Belmont Green is a non-conforming lender, and extends loans to borrowers with adverse credit history. But the lender will not underwrite borrowers with recent bad-credit events or who have large-size defaults in their credit history.

Belmont Green, which launched in October 2016, is including various mortgage types in the collateral pool, including owner-occupied, buy-to-let investor, interest-only and adverse-credit loans. It’s first asset-backed transaction was issued last October, and also had a triple-A-rated senior stack.

The deal was arranged by RBS and Macquarie Bank International.

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