With the successful pricing of its first home equity principal finance transaction, SABR 2004-OP1, Barclays Capital became the latest investment bank to toss its hat into this arena of the home-equity market. Barclays Managing Director Michael Wade outlines the plans for the new shelf, which culminates a yearlong ramp-up that included the hiring of bankers, traders and research analysts.

ASR: How does this venture

into principal finance help Barclays with the build-out of its securitization practice?

Wade: Principal finance and coverage of the home-equity asset class are the latest additions to our ABS practice. I feel Barclays has the right platform in terms of its double-A rated balance sheet, global distribution and trading to make a strong push in the sector. Combined with the quality of the professionals we have added to the team, we feel we can add significant value to our clients and will succeed competitively.

ASR: While your first SABR offering was backed by Option One-originated loans, what other lenders may we expect to see in future SABR deals?

Wade: As a new entrant into the market, we are focusing on the top-tier originators. Option One is the originator and servicer of loans featured in the inaugural SABR shelf securitization, 2004-OP1. But we have committed to acquire collateral from other originators that will be announced in the coming weeks.

ASR: In addition to mortgage product, SABR is capable of securitizing automobile, motorcycle and recreational vehicle loans. What other types of collateral does Barclays hope to offer via SABR?

Wade: Barclays established SABR as a flexible shelf vehicle to facilitate the securitization of home-equity ABS as well as other consumer-based assets. Barclays is exploring opportunities with several of its existing clients in connection with whole loan sales. Certainly, we are paying close attention to developments in the auto whole loan principal sector, which has seen an increasing amount of activity over the past year.

ASR: What collateral types will we not see in SABR transactions?

Wade: HELOCs, home improvement loans and unsecured consumer receivables would be examples of collateral types not included in SABR shelf deals. SABR will also exclude certain categories of home equity loans, including Section 32 loans, high cost or predatory loans and loans with sub-500 credit scores.

ASR: What servicing agreements does Barclays have in place, either as master or backup servicer, for loans it acquired?

Wade: SABR 2004-OP1 will be serviced by Option One. Other SABR shelf securitizations will involve third-party servicers approved by Barclays. Barclays will actively monitor its approved servicers to ensure they adhere to the highest servicing standards.

ASR: The whole loan market for mortgage portfolios is increasingly competitive; what is the long-term vision for SABR and principal finance in general?

Wade: Our vision is to bring to bear the full range of financing alternatives for our important clients: whole loan finance, ABCP conduit funding, warehouse, derivatives, term ABS underwriting, market value swaps et al. It is our view that clients want strong, dedicated financial partners that can provide this full range of services.

ASR: In addition to the current roster of bankers, analysts and traders, how many others are on the principal finance team? Is it expected to grow further in 2004?

Wade: Our aim is to develop a fully integrated home-equity ABS effort rather than distinct principal finance and agented teams within the ABS practice. Naturally, we have plans to complement this core team as our whole-loan pipeline expands and we make progress in the agented home equity sector.

ASR: Dealer shelf product has become increasingly homogeneous in the past year. Do you hope to conform to other bank's vehicles, or differentiate SABR?

Wade: We endeavor to distinguish our shelf from other vehicles by adhering to a philosophy of placing the best performing bonds into the marketplace. A key tenet of our approach is to forge close relationships with key originators and servicers. Additionally, we pride ourselves on top-notch analytics, which we make highly accessible to our investor base so they understand the bonds they are purchasing. Finally, we are committed to providing a liquid secondary market in SABR transactions and the home equity sector in general.

ASR: SABR initially had $5 billion of issuance capacity. How frequently can we expect to see SABR issue?

Wade: We would expect to issue approximately one deal per month, which will require SABR to seek additional shelf capacity later this year.


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