Citigroup plans to issue non-conforming, U.K. residential mortgage backed securities backed both by buy-to-let mortgages and non-conforming loans for owner-occupied properties.

DBRS and Standard & Poor’s have assigned preliminary ratings to the deal, Thrones 2014-1. The deal will be sized according to investor demand.

The £310.89 million preliminary pool is comprised of loans with a weighted-average current loan-to-value (LTV) ratio at 91.09%. The portfolio has 6.7 years of seasoning.

According to DBRS, the loans were originated towards the peak of the U.K. housing market with 99.72% of the mortgages originated in 2007 and 2008 (the worst performing vinatges) with the weighted average current LTV at 82.43%.  

Of the preliminary pool, 26.27% are for buy-to-let mortgage loans and 22.41% are loans made to first-time buyers.  

There is also a high proportion (85.01%) of interest-only loans in the preliminary pool. Of the interest-only loans, only 1.23% have a maturity of less than 10 years — these shorter term loans have a higher risk of default than repayment mortgage loans and long-term interest-only loans.  

The class A notes will be rated ‘AAA’/ ‘AAA’; the class B notes, ‘AA’/ ‘AA’; the class C notes ‘A’/ ‘A’; the class D notes ‘BBB’/ ‘BBB’; the class E notes, ‘BB’/ ‘BB’; and the class F notes ‘B’/ ‘B’.

The loans were originated by Edeus Mortgage Creators  (63.82%) and Victoria Mortgage Funding (36.18%).  

Citigroup's deal follows non-conforming RMBS transactions completed this month by Paragon Mortgages and Precise Mortgages, which issued over £500 million ($854 million) of senior securities backed by residential mortgages.

Paragon Mortgages priced £319 million of senior notes structured with a weighted average life of 3.3-years priced at 68 basis points over three-month Libor. Precise Mortgages priced the 3.7-year, £200 million senior tranche of its RMBS, Precise Mortgage Funding 2014-1, at 80 basis points over three month Libor.   


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