Russia’s Vozrozhdenie Bank is coming to market with a RUB 7.4 billion securitization of residential mortgages, it’s fifth to date, according to Moody’s Investors Service.
The securitization trust, Mortgage Agent Vozrozhdenie 5, is incorporated as a mortgage agent under the law of the Russian Federation. It will issue one class of RUB-denominated notes to finance the purchase of loans originated by Vozrozhdenie Bank. This tranche is rated Baa3 by Moody’s. Part of the pool purchase will be funded by a subordinated loan provided by Vozrozhdenie Bank; this loan is unrated.
Vozrozhdenie Bank will continue to service the loans after the sale; Agency for Housing Mortgage Lending JSC will act as back-up servicer in the transaction. It is required to step in within 90 days should the servicer become insolvent or default on its obligation under the servicing agreement.
The deal is static, no substitution of loans will take place during the life of the deal.
Among Moody’s key credit considerations are portfolio's expected loss of 4.5%, which is lower than the Russian RMBS average of 7% and is based on Moody's assessment of the lifetime loss expectation was performance of precedent transactions and of the originator's mortgage loan book which is better-than-average in the Russian RMBS market.
In order to obtain the Baa3 credit rating, the sponsor had to provide a MILAN Credit Enhancement of 18% to the deal. This reflects the loss Moody's expects the portfolio to suffer in the event of a severe recession scenario. This is less than the 24% average credit enhancement that Moody’s requires on Russian RMBS. It reflects the portfolio’s “more moderate” weighted average loan-to-value ratio of 47.9%, compared to the average for the market of approximately 60%. Another factor that led Moody’s to require less credit enhancement was a “moderate” percentage of loans where borrowers have not provided the official tax form as proof of income of 17.2%.