U.K. buy-to-let lender Paragon Mortgages is working on a residential mortgage backed securitization deal, according to Standard & Poor’s.

The lender has hired Lloyds, Macquarie, Morgan Stanley and Natixis as joint lead managers for Paragon 21.

The transaction is backed by a provisional pool of £153.12 million ($245 million) of Paragon’s buy-to-let mortgages that were originated between July and September 2014. Paragon will add additional mortgages to the pool before closing.  

Buy-to-let properties are exposed to different foreclosure risks than owner-occupied properties. These risks include the borrower's level of reliance on the rental receipts to meet mortgage payments and the borrower's prior experience in managing rental properties.  

All of the loans in the pool are currently in their fixed or discount period; 63.66% pay a fixed rate of interest, and the remaining 36.34% pay at a rate linked to LIBOR. After the end of the fixed or discount period, all of Paragon's loans will revert to a rate linked to LIBOR. The loans have a weighted average remaining term of 20-years. 

Paragon plans to sell only the senior rated securities and will retain an unrated class D tranche. The investors placed bonds include ‘AAA’ rated securities, ‘AA” rated securities and ‘A’ rated securities.

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