A new U.K. non-conforming mortgage lender is launching its first-ever securitization in a transaction that will produce up to £230.6 million (US$301.1 million) in residential-backed bonds, according to Moody’s Investors Service.
Tower Bridge Funding No.1 PLC is the debut shelf for Belmont Green Finance, a mortgage lender that began operations in late 2016 extending home purchase loans to borrowers with adverse credit history.
The transaction includes 996 loans secured by home mortgages for 904 borrowers, according to a Moody’s Investors Service presale report. The loans – while lightly seasoned with nearly 80% issued since the second quarter – are underwritten with substantial equity with a weighted average loan-to-value ratio of 69.54%.
The initial bonds to be issued total £201.5 million, with an additional £30.1 million expected to be added during a prefunding period.
Five tranches of notes will be issued in the transaction; the senior, Class A notes carry preliminary Aaa ratings from Moody’s and comprise 82% of deal, according to the presale. Tower Bridge will also issue four classes of floating-rate subordinate notes.
While Belmont Green extends loans to borrowers with adverse credit history, it won’t provide loans to borrowers with recent bad-credit events or who have large-size defaults in their credit history. Belmont Green’s classification as a non-conforming lender is not so much borrower credit profiles bur rather the new lender’s unusual and “quite niche” underwriting practices, according to Moody’s.
Belmont Green will underwrite a single loan to up to four borrowers’ incomes; extend “buy-to-let” investor property mortgages to expatriate borrowers; or loan to retirees or pensioners, for example.
Belmont Green will adhere to some pool restrictions as it adds new loans to the collateral. Loans cannot have LTVs of greater than 70.5%, and the pool cannot exceed a 25% concentration of borrowers with previous court judgments against them. But loans can have histories of delinquencies up to 90 days.
Moody’s notes the deal will launch with some “non-neglible” borrower and geographic concentrations, but those should be reduced during the prefunding phase.