An £821.7 million pool of higher-risk problem UK residential mortgage loans originated by GE Home Money Lending and other GEHML-affiliated is being pooled into in a new Towd Point Mortgage Trust asset-backed offering arranged through Credit Suisse.
Towd Point Mortgage Funding 2016-Vantage 1PLC is a collateralization of loans purchased from GE Capital in 2015 by Promontoria (Vantage), during GE’s global divestment of its financial empire that included its home lending operations that has since ceased originations in the UK.
The pool of loans includes 38.34% have been in arrears for a month or more, are secured by both owner-occupied and investor-owned properties, mostly in the form of interest-only loans (59.22% of the pool) or partial interest loans (11.67%). Restructured loans account for 13.8% of the pool.
Of concern to ratings agencies grading the deal is the fact nearly 38% were originated with no income verification, 73.4% are remortgage loans, and almost 21% of the borrowers have a public judgment filed against them.
The loans (with a weighted average-age of 10.4 years) A high number of formerly delinquent loans that were previously in arrears for more than one month (38.34%) are included in the collateral, as well restructured loans that are now current that amount to 13.8% of the pool.
The loans back seven classes of notes, including a pair of Class A1 and A2 notes that carry preliminary ‘AAA’ structured finance ratings from Standard & Poor’s and bond rating agency DBRS. The Class A1 notes (which will have 45% available credit enhancement) will have a size equal to 55% of the final sizing of the bonds’ notional value, while the A2 notes will represent 4%.
The capital structure of the transaction also has three series of B, C and D notes (with S&P ratings ranging from ‘AA’ to ‘BBB+’) that are being treated as deferrable-interest notes by S&P, as well as subordinate Class E and F notes.
All of the notes are 38-year notes, with a two-year optional call date.
S&P noted the lack of a rate-swap agreement in the transaction, which exposes risk to investors on the “mismatch” of the fixed-rate loans and the notes’ floating rate based on three-month Libor.
The first-lien loans have a weighted average seasoning of 10.4 years, and a weighted-average original loan-to-value of 80.99%, and an average loan size balance of £108,602 and an average APR of 3.06%.
The acquisition of the loans from GE Money’s UK as part of an overall $13 billion sell-off by parent GE of its UK mortgage loan book in a series of transactions. Another GE loan buyer from 2015, Kensington Mortgage Co., collateralized its collection of former GE Money loans in a £1,124 billion transaction in October.