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UK's Accord Mortgages preps another £3.8B prime RMBS

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UK-based Accord Mortgages Ltd. is marketing its next series of bonds backed by £3.8 billion in recently originated residential loans, according to ratings agency presale reports.

Brass No. 7 plc is Accord’s 9th overall securitization of prime, mostly fixed-rate loans to borrowers of owner-occupied mortgages, and only it’s second with a built-in revolving period of up to four years.

A single tranche of Class A tranche of notes with preliminary triple-A ratings from Moody’s Investors Service and Fitch Ratings will be issued. There will also be an unrated tranche of Class Z variable-funding notes that will provide 12.1% overcollateralization to the senior notes and fund a 1.5% reserve account.

The size of the individual tranches are to be determined, but they will be backed by loans to 20,602 borrowers with £3.8 billion in remaining balances. Accord’s two most recent securitizations issued approximately $2.6 billion in RMBS notes.

More than half (60%) of the loans in Brass No. 7 are more recent originations underwritten in 2017 and 2018, and serviced by Yorkshire Building Society. Accord is an affiliate of Yorkshire, which carries a corporate A3 rating from Moody’s.

The loans have an average loan-to-value ratio of 71%, which Moody’s states is in line with U.K. peer lender originations. None of the loans are delinquent, and borrowers are all fully income-verified with none the subject of a county court judgment.

The 30-year mortgages have an average seasoning of 27 months.

Moody’s expects losses of 1.2%, similar to other prime UK transactions. Fitch did not project cumulative losses, but notes the existing managed portfolio has net losses of less than 1%.

The deal is being arranged by Lloyds, which also acts as joint lead manager with BNP Paribas and Merrill Lynch Intl.

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RMBS Europe U.K.