Summary
- Our European RMBS indices track the performance to date of the transactions that we rate.
- In this quarter we introduce our new Dutch buy-to-let (BTL) index which was previously included within the wider Dutch RMBS index. The Dutch BTL sector has recently expanded in terms of transactions and originators.
- Overall, European RMBS collateral performance in most European jurisdictions stabilized in the second quarter of 2021 almost at the pre-COVID-19 level. We observed rising delinquencies for Irish, U.K. nonconforming post-2014, and Dutch BTL transactions.
- To some degree, we view these deteriorations as technical for now. Movements in the Irish index reflect the redemption of Fastnet 5 and 6 which had better than average collateral performance. Increased delinquencies in U.K. nonconforming post-2014 transactions reflect the redemption of Tolkien Funding Sukuk No. 1 PLC and the addition of three new transactions to the index: Finsbury Square 2020-2 PLC, Together Asset Backed Securitisation 2020-1 PLC, and Polaris 2020-1 PLC. Increased arrears in certain Dutch Property Finance transactions explain rising delinquencies in the Dutch BTL index.
- Prepayment rates show a mixed picture, some countries have shown declines as pent up demand to move or remortgage following lockdowns has been satisfied in the first quarter. U.K. nonconforming transactions are a notable outlier, in that prepayments continued to increase throughout the COVID-19 pandemic (potentially explained by the Financial Conduct Authority's mortgage prisoner initiative).
- The end of Q3 2021 will see European governments withdraw the measures they instituted at the start of the pandemic to support housing market demand and mortgage borrowers. We explore in our recent publication on how European RMBS will respond when COVID-19 relief measures end, how we expect performance to evolve in Europe (see "How Will European RMBS Respond When COVID-19 Relief Measures Come To An End?," published on July 12, 2021).
- For the most part, we do not expect performance to deteriorate materially, but certain U.K. nonconforming and Irish reperforming deals are at risk because borrowers in these transactions have weaker payment profiles.
Table 1
Total Delinquencies | |||||
---|---|---|---|---|---|
(%) | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 |
All countries - index | 3.3 | 3.3 | 3.3 | 3.3 | 3.6 |
France and Belgium | 0.4 | 0.4 | 0.4 | 0.5 | 0.6 |
Italy | 2.6 | 2.5 | 2.7 | 3.2 | 4.1 |
Ireland | 8.5 | 6.9 | 6.8 | 6.4 | 6.0 |
Netherlands (excl. BTL) | 0.4 | 0.5 | 0.6 | 0.5 | 0.7 |
Netherlands BTL | 1.6 | 1.1 | 1.5 | 1.7 | 1.8 |
Portugal | 3.2 | 3.4 | 3.3 | 3.4 | 3.7 |
Spain | 6.1 | 6.1 | 6.0 | 5.9 | 6.1 |
U.K. prime | 0.9 | 0.9 | 0.9 | 0.8 | 0.8 |
U.K. BTL - pre-2014 | 3.0 | 2.9 | 3.1 | 3.2 | 3.5 |
U.K. BTL - post-2014 | 0.5 | 0.2 | 0.1 | 0.3 | 0.4 |
U.K. Nonconf - pre-2014 | 12.9 | 12.8 | 12.7 | 12.1 | 13.4 |
U.K. nonconf - post-2014 | 2.9 | 1.5 | 1.3 | 1.6 | 2.1 |
Table 2
Annualized Prepayment Rate | |||||
---|---|---|---|---|---|
(%) | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 |
All countries - index | 9.7 | 10.0 | 9.8 | 9.0 | 8.6 |
France and Belgium | 7.7 | 8.5 | 9.2 | 9.4 | 10.7 |
Italy | 4.6 | 5.1 | 5.1 | 3.6 | 3.6 |
Ireland | 6.4 | 6.4 | 6.0 | 5.2 | 3.8 |
Netherlands (excl. BTL) | 11.2 | 11.7 | 11.3 | 11.7 | 10.3 |
Netherlands BTL | 17.4 | 21.6 | 16.6 | 11.6 | 21.0 |
Portugal | 5.6 | 5.2 | 5.0 | 4.7 | 4.6 |
Spain | 4.2 | 4.1 | 4.6 | 3.9 | 2.5 |
U.K. prime | 20.6 | 22.1 | 21.1 | 18.4 | 16.8 |
U.K. BTL - pre-2014 | 8.7 | 8.0 | 6.7 | 6.3 | 5.7 |
U.K. BTL - post-2014 | 7.7 | 8.5 | 9.2 | 9.4 | 10.7 |
U.K. nonconf - pre-2014 | 10.6 | 9.5 | 8.7 | 7.9 | 6.9 |
U.K. nonconf - post-2014 | 13.0 | 19.3 | 16.0 | 16.5 | 14.9 |
Chart 1
Chart 2A
Chart 2B
Chart 3A
Chart 3B
Chart 4
Chart 5
Chart 6A
Chart 6B
Table 4
New Ratings Activity As Of Q2 2021 | ||||
---|---|---|---|---|
Deal | Closing date | Country | Asset class | Noteworthy features |
SAECURE 20 B.V. | April 7, 2021 | Netherlands | Prime | The transaction is a static RMBS that securitized a €700.8 million pool of prime, first- and sequentially lower-ranking Dutch mortgage loans. SAECURE 20 is the latest securitization of mortgage loans originated by Aegon Hypotheken B.V. and Aegon Levensverzekering N.V. |
Jubilee Place 2021-1 B.V. | April 8, 2021 | Netherlands | BTL | Jubilee Place 2021-1 is a RMBS transaction that securitizes a portfolio comprising €304.3 million of BTL mortgage loans secured on properties located in the Netherlands. This is the second Jubilee Place transaction, following Jubilee Place 2020-1, which we also rated. The loans in the pool were originated by DNL 1 B.V. (DNL; 30%; trading as Tulp), Dutch Mortgage Services B.V. (DMS; 53%; trading as Nestr), and Community Hypotheken B.V. (Community; 17%; trading as Casarion). All three originators are new lenders in the Dutch BTL market, with a very limited track record. |
London Wall Mortgage Capital PLC Fleet 2021-1 | May 17, 2021 | U.K. | BTL | London Wall Mortgage Capital PLC Series Fleet 2021-01 is an RMBS transaction that securitizes a portfolio of BTL mortgage loans secured on properties in England and Wales. This transaction is the fourth securitization under the London Wall Mortgage Capital PLC program. The loans in the pool were originated between 2017 and 2021 by Fleet Mortgages Ltd., a nonbank specialist BTL lender. |
Primrose Residential 2021-1 DAC | May 20, 2021 | Ireland | Reperforming | Primrose Residential 2021-1 is a static RMBS transaction that securitizes a portfolio of loans totaling €851.8 million. The portfolio consists of performing and reperforming owner-occupied and buy-to-let mortgage loans secured over residential properties in Ireland. The securitization comprises two purchased portfolios, which were previously securitized in two different RMBS transactions, ERLS 2019 PL1 and Grand Canal Securities 1 (GCS1). They aggregate assets from three Irish originators. The loans in the ERLS 2019 PL1 subpool were originated by Permanent TSB PLC, and the loans in the GCS1 subpool were originated by Irish Nationwide Building Society and Springboard. |
Domi 2021-1 B.V. | May 31, 2021 | Netherlands | BTL | Domi 2021-1 is a static RMBS transaction that securitizes a portfolio of €352.2 million BTL mortgage loans secured on properties in the Netherlands. The loans in the pool were originated by Domivest B.V. between 2019 and 2021. The transaction features a one-month prefunding period. |
Stratton Mortgage Funding 2021-3 | June 14, 2021 | U.K. | Nonconforming | The pool comprises first-ranking nonconforming, reperforming, owner-occupied, and buy-to-let mortgage loans that were part of the Oncilla Mortgage Funding 2016- PLC and Stratton Mortgage Funding portfolios. The pool is well-seasoned with a weighted-average seasoning of almost 15 years. |
Rochester Financing No. 3 PLC | June 15, 2021 | U.K. | Nonconforming | Rochester Financing No. 3 PLC is a static RMBS transaction that securitizes a portfolio of £214.4 million owner-occupied and BTL mortgage loans secured on properties in the U.K.The transaction is a refinancing of Rochester Financing No. 2 PLC, which closed in February 2016. |
BBVA RMBS 20, Fondo de Titulizacion de Activos | June 17, 2021 | Spain | Prime | BBVA RMBS 20 is a static RMBS transaction. The €2,701,055,511 provisional pool as of May 21, comprises 26,237 mortgage loans, originated by Banco Bilbao Vizcaya Argentaria S.A. (BBVA; 93.38% of the pool balance), Catalunya Caixa S.A. (2.05%), and Unnim Banc (1.58%) (the last two are now part of BBVA). The assets are first-ranking mainly owner-occupied loans secured against properties in Spain. The loans originated by BBVA are defined as "flexible" loans due to a set of limited amendments allowed for each loan. In particular, the borrower can modify loan maturities, defer payment installments, make a balloon payment (a large final installment), or change from a floating interest rate to a fixed interest rate for three years, subject to certain conditions. |
Mortimer BTL 2021-1 PLC | June 18, 2021 | U.K. | BTL | Mortimer 2021-1 is a static RMBS transaction that securitizes a portfolio of BTL mortgage loans secured on properties in the U.K. LendInvest originated the loans in the pool between August 2018 and May 2021. LendInvest started operating in late 2008 under the name Montello Bridging Finance. Most of their BTL book was securitized in either Mortimer 2019-1, Mortimer 2020-1, disposed of through a portfolio sale to JP Morgan, or securitized in the Mortimer 2021-1 transaction. |
Finance Ireland RMBS No. 3 DAC | June 14, 2021 | Ireland | Prime | Finance Ireland RMBS No. 3 is a static RMBS transaction that securitizes a portfolio of €297.5 million owner-occupied mortgage loans secured on properties in Ireland. This transaction is very similar to its predecessor Finance Ireland RMBS No. 2. The main difference is that Finance Ireland RMBS No. 3 is backed only by owner-occupied mortgage loans, while the previous transaction was backed by a mixture of owner-occupied and BTL mortgage loans. The loans in the pool were originated between 2016 and 2021 by Finance Ireland Credit Solutions DAC and Pepper Finance Corp. DAC. Finance Ireland is a nonbank specialist lender, which purchased the Pepper Finance Residential Mortgage business in 2018. |
Summerhill Residential 2021-1 DAC | June 24, 2021 | Ireland | Reperforming | Summerhill Residential 2021-1 is a static RMBS transaction that securitizes a €299 million portfolio of performing and reperforming owner-occupied and BTL mortgage loans secured over residential properties in Ireland. The securitization comprises a purchased portfolio, which was previously securitized in Shamrock Residential 2019-1 DAC. Irish Nationwide Building Society, Bank of Scotland PLC, Bank of Scotland (Ireland) Ltd., Nua Mortgages Ltd., and Start Mortgages DAC originated the loans. |
Mulcair Securities No. 2 DAC | June 25, 2021 | Ireland | Reperforming | Mulcair Securities No. 2 DAC is a static RMBS transaction that securitizes a portfolio of €343.74 million loans (excluding €5.53 million in unsecured loans), which consist of owner-occupied and BTL mortgage loans secured over residential properties in Ireland, most of which are now performing after being restructured. They were originated by the Bank of Ireland, ICS Building Society, and Bank of Ireland Mortgage Bank (BOIMB). |
Finsbury Square 2021-1 Green PLC | June 30, 2021 | U.K. | Nonconforming/BTL | Finsbury Square 2021-1 Green PLC (FSQ 2021-1) is a revolving RMBS transaction that securitizes a portfolio of owner occupied and BTL mortgage loans secured on properties in the U.K., with a prefunding mechanism. The loans in the pool were originated by Kensington Mortgages Company Ltd., a non-bank specialist lender. The collateral comprises complex income borrowers with limited credit impairments, and there is a high exposure to self-employed, contractors, and first-time buyers. |
Together Asset Backed Securitisation 2021-CRE2 PLC | June 30, 2021 | U.K. | Commercial | The transaction is a static transaction that securitizes a portfolio of £249 million mortgage loans, secured on commercial (77.1%), mixed-use (17.9%), and residential (5.00%) properties in the U.K. This is the second transaction we have rated in the U.K. that securitizes small ticket commercial mortgage loans after Together Asset Backed Securitisation 2021-CRE1 PLC. The loans in the pool were originated by Together Commercial Finance Ltd. (a nonbank specialist lender) between 2017 and 2021. |
Related Research
- S&P Global Ratings Publishes July 2021 Chart Book For EMEA Structured Finance, July 23, 2021
- How Will European RMBS Respond When COVID-19 Relief Measures Come To An End?, July 12, 2021
- S&P Global Ratings' U.K. Buy-To-Let Market Primer, June 1, 2021
- Economic Snapshots Indicate Europe Responding Quickly To The Grand Reopening, July 9, 2021
- Economic Research: Early Momentum Boosts The U.K. Recovery, June 24, 2021
This report does not constitute a rating action.
Primary Credit Analyst: | Alastair Bigley, London + 44 20 7176 3245; Alastair.Bigley@spglobal.com |
Secondary Contacts: | Giovanna Perotti, Milan + 390272111209; Giovanna.Perotti@spglobal.com |
Feliciano P Pereira, CFA, Madrid + 44 20 7176 7021; feliciano.pereira@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.