Dutch mortgage lenders NN Bank and NN Leven plan to sell bonds backed by a portfolio of residential mortgage assets worth €595 million ($666 million), according to Moody’s Investors Service.

The collateral pool backing Hypenn RMBS IV has 20.2% exposure to mortgages that pay only interest and hav no specific maturity date. However the legal final maturity of the notes issued by the trust is 2097, by which time most of borrowers will be theoretically aged at least 120 years old.

Moody’s views these loans as riskier because the maturity of the loan only arises with the death of the borrower, which increases the risk of default in the pool relative to benchmark fixed rated loans.

Only 26.3% of the collateral pool benefits from the Dutch national mortgage guarantee scheme, Nationale Hypotheek Garantie (NHG). This guarantee covers certain losses realized after the foreclosure of a property, including the outstanding principal amount owed to the lender, unpaid accrued interest, repossession costs, and other miscellaneous costs. The sponsors began to shift the collateral pool away from NHG only loans in Hypen III; Hypen II was comprised 100% of NHG loans.

Loans in the pool have a weighted average seasoning of three months and a weighted average remaining term of 36.2 years. The loans are highly leveraged, with a 98.4% weighted average loan-to-value ratio.

The trust will issue two tranches of ‘Aaa’ rated class A notes.   

There is also a  subordinate B tranche that is not rated by Moody’s.

JP Morgan Securities, Rabbobank and ING Bank are the lead managers.

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