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Kensington readies £384.1M UK RMBS with recycled collateral

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Kensington Mortgage Co., a U.K. nonbank lender, is marketing £384.1 million (US$504.6 million) of bonds backed by a mix of loans on owner-occupied and buy-to-let homes.

The collateral for Finsbury Square 2019-1, consists of 2,411 loans with weighted average seasoning of 11.5 months. The majority were originated over the past year, but the collateral includes some loans from an earlier transaction, Finsbury Square 2016-1, which has been called.

Nearly 26% pay only interest until maturity, when a balloon payment of principal is due. DBRS estimates that about half of these, or 12.8% of the total pool, are likely to be refinanced before the mortgage bonds mature.

Over 47% of the loans were originated for homeowners who are self-employed, retired or have an unclassified credit standing, with 13.3% having a prior county court judgment. Another 4.2% were originated under the U.K.’s Help-to-Buy program for first-time buyers.

And not all of the loans are current; 1.7% have missed between one and three monthly payments, and 1% have been delinquent for more than three months; however, all of these came from the 2016-1 transaction.

The loans have a weighted average interest rate of 4.1%, and a weighted average loan-to-value ratio of 73.1%.

Six classes of notes will be issued in the transaction, all of them denominated in British pound sterling. The size of the individual tranches has yet to be determined, although the senior tranche of Class A notes, provisionally rated triple-A by both DBRS and Fitch Ratings, is expected to account for 84% of the capital stack. Two other tranches, the Class X and Class Z, will fund a prefunding reserve, allowing the trust to acquire additional loans before the initial note payment date.

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Mortgages RMBS U.K. Europe