A British specialty mortgage lender is securitizing its second round of first-lien, non-conforming mortgages, including a large segment of loans obtained from GE Money’s downsizing UK affiliate.

Hawksmoor Mortgages 2016-2 plc is a British sterling-pound denominated RMBS with a £1.124 billion pool balance secured by mortgages to residential properties in the UK extended to 12,153 borrowers, according to presale reports from Moody’s Investors Service and Standard & Poor’s.

The notes are split among 10 tranches, led by an £865.7 million Tranche A class of notes with 25.96% total credit enhancement and preliminary, triple-A structured finance ratings from Moody’s and S&P.

The Hawksmoor Mortgages trust will pay quarterly interest payments based on a three-month Libor rate. The rated notes include an August 2019 call option dates where the rated notes will pay an additional step-up margins.

Nearly 80% of the loans in the static pool were originated by GE Home Money Lending, which in 2015 saw parent General Electric sell off nearly $13 billion of its mortgage loan portfolio, including to private-equity Kensington Mortgage Co., the mortgage administrator of the Hawksmoor deal.

The loans, nearly all of which were originated prior to 2008, have an average seasoning of 9.95 years (higher than average for UK RMBS transactions, according to Moody’s). Some of the loans carry some warts:  more than 8% of the pool is in arrears, including 3.62% that have been in arrears for more than 60 day, and nearly 13% of borrowers have civil court judgments entered against them, according to presale reports.

Another credit challenge is the incomplete information on GE Money Mortgages’ and GE Money Home Lending’s underwriting practices. Both firms have discontinued their UK lending activities, and Moody’s said it had not been able to carry out a “full assessment” of both entities’ underwriting practices.  Also, nearly 59% of the mortgages have advanced on an interest-only basis, indicative of cash-stretched borrowers.  

But Moody’s noted 54.5% of the loans have not been in arrears the prior five years.

Citigroup, Deutsche Bank, HSBC and Merrill Lynch International were joint lead managers on the deal, which was arranged by Merrill Lynch and Deutsche’s London branch.

The pool is the second securitization of the year by the Hawksmoor trust. In August, about £3.4 billion of similar vintage loans were collateralized.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.