Summary
- Our European RMBS indices track the performance to date of the transactions that we rate.
- Overall, European RMBS collateral performance in most European jurisdictions was unchanged quarter-on-quarter and returned to the pre-COVID-19 level. One notable exception was the performance of the U.K. nonconforming pre-2014 index, where arrears were high compared to March 2020, yet had improved since Q2 2021.
- Notably, total arrears in Irish transactions decreased by 3.1%--reflecting the redemption of Grand Canal Securities 1 DAC and Shamrock Residential 2019-1 DAC--which had worse than average collateral performance.
- Prepayment rates stabilized but remained high compared to Q3 2020 and at levels seen in March 2017 (approximately 10.4%), as low interest rates continued to create incentives for borrowers to refinance.
- Notwithstanding piecemeal extensions in certain countries, measures aimed at assisting consumers are drawing to a close. Although some collateral performance deterioration is likely as a result, we overall expect this to be contained to levels envisaged by existing ratings. However, inflation and possible rate rises could affect certain asset classes--such as reperforming assets and legacy U.K. nonconforming--more significantly than others.
Table 1
| Total Delinquencies | |||||
|---|---|---|---|---|---|
| (%) | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 |
| All countries - index | 3.2 | 3.2 | 3.3 | 3.3 | 3.3 |
| France and Belgium | 0.4 | 0.4 | 0.4 | 0.4 | 0.5 |
| Italy | 2.1 | 2.3 | 2.5 | 2.7 | 3.2 |
| Ireland | 4.8 | 7.9 | 6.9 | 6.8 | 6.4 |
| Netherlands (excl. BTL) | 0.4 | 0.4 | 0.5 | 0.6 | 0.5 |
| Netherlands BTL | 1.0 | 1.3 | 1.1 | 1.5 | 1.7 |
| Portugal | 2.7 | 3.2 | 3.4 | 3.3 | 3.4 |
| Spain | 6.4 | 6.1 | 6.1 | 6.0 | 5.9 |
| U.K. prime | 0.9 | 0.9 | 0.9 | 0.9 | 0.8 |
| U.K. BTL | 1.8 | 1.8 | 2.7 | 2.9 | 3.1 |
| U.K. BTL - pre-2014 | 2.1 | 2.1 | 2.9 | 3.1 | 3.2 |
| U.K. BTL - post-2014 | 0.7 | 0.7 | 0.2 | 0.1 | 0.3 |
| U.K. nonconf | 12.5 | 12.9 | 12.4 | 12.3 | 11.8 |
| U.K. nonconf - pre-2014 | 13.2 | 13.7 | 12.8 | 12.7 | 12.1 |
| U.K. nonconf - post-2014 | 3.0 | 3.0 | 1.5 | 1.3 | 1.6 |
Table 2
| Annualized Prepayment Rate | |||||
|---|---|---|---|---|---|
| (%) | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 |
| All countries - index | 10.4 | 10.4 | 10.0 | 9.8 | 9.0 |
| France and Belgium | 10.0 | 9.6 | 8.5 | 9.2 | 9.4 |
| Italy | 4.9 | 5.0 | 5.1 | 5.2 | 3.6 |
| Ireland | 6.3 | 6.8 | 6.4 | 6.0 | 5.2 |
| Netherlands (excl. BTL) | 12.1 | 11.4 | 11.7 | 11.3 | 11.7 |
| Netherlands BTL | 14.9 | 14.6 | 21.6 | 16.6 | 11.6 |
| Portugal | 5.9 | 5.6 | 5.2 | 5.0 | 4.7 |
| Spain | 4.2 | 4.1 | 4.1 | 4.6 | 3.9 |
| U.K. prime | 19.1 | 21.2 | 22.1 | 21.1 | 18.4 |
| U.K. BTL | 10.0 | 9.8 | 8.0 | 7.2 | 6.7 |
| U.K. BTL - pre-2014 | 9.0 | 9.1 | 8.0 | 6.7 | 6.3 |
| U.K. BTL - post-2014 | 10.0 | 9.6 | 8.5 | 9.2 | 9.4 |
| U.K. nonconf | 11.7 | 11.6 | 9.9 | 9.0 | 8.1 |
| U.K. nonconf - pre-2014 | 11.2 | 11.3 | 9.5 | 8.7 | 7.9 |
| U.K. nonconf - post-2014 | 18.4 | 15.8 | 19.3 | 16.0 | 16.5 |
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Table 4
| New Ratings Activity As Of October 2021 | ||||
|---|---|---|---|---|
| Deal | Closing date | Country | Asset class | Noteworthy features |
| Canada Square Funding 2021-2 PLC | July 6, 2021 | U.K. | Nonconforming | Canada Square Funding 2021-2 PLC (CSF 2021-2) is a RMBS transaction that securitizes a portfolio of £264.8 million BTL mortgage loans secured on properties located in the U.K. The loans in the pool were originated by Fleet Mortgages Ltd. (54.9%), Landbay Partners Ltd. (29.3%), and Topaz Funding Ltd. (under the brand name Zephyr Homeloans; 15.8%). All loans were originated between May 2020 and May 2021. We consider the collateral to be prime. Citibank, N.A., London Branch, retains an economic interest in the transaction in the form of a vertical risk retention (VRR) loan note accounting for 5% of the pool balance at closing. The remaining 95% of the pool was funded through the proceeds of the mortgage-backed rated notes. |
| Fastnet Securities 17 DAC | July 14, 2021 | Ireland | Prime | Fastnet 17 is a securitization of a pool of first-ranking residential mortgage loans, secured on properties in Ireland originated by Permanent TSB PLC. Although the loans in the pool were originated as prime mortgages, arrears in the portfolio peaked in the aftermath of the financial crisis, mainly due to the stressed macroeconomic environment in Ireland. Since then, arrears have decreased in line with overall mortgage market trends in Ireland. We attribute this to the improved economy and to restructuring arrangements implemented by the servicer. Most of these restructuring took place between 2016 and 2017, and borrowers' payment performance has improved over the past few years. |
| Fastnet Securities 16 DAC | July 23, 2021 | Ireland | Prime | Fastnet 16 is a RMBS transaction that securitizes a portfolio of €3,948.8 million owner-occupied mortgage loans, secured over residential properties in Ireland. The originator and administrator of the loans is Permanent TSB PLC (PTSB). The loans in the pool are prime mortgages, with no loans in arrears greater than 30 days. The structure incorporates an arrears provisioning mechanism rather than being linked solely to the loans' loss status, which we consider positive for the transaction, given that any excess spread is trapped as soon as the loan is in arrears rather than waiting until the recovery process is completed. |
| Jamestown Residential 2021-1 DAC | July 23, 2021 | Ireland | Nonconforming | RMBS transaction that securitizes a €558 million portfolio of performing and reperforming owner-occupied and buy-to-let mortgage loans secured over residential properties in Ireland. The securitization comprises a purchased portfolio, which was previously securitized in Jepson Residential 2019-1 DAC. Bank of Scotland (Ireland) Ltd., Nua Mortgages Ltd., and Start Mortgages DAC originated the loans. |
| Polaris 2021-1 PLC | July 28, 2021 | U.K. | Nonconforming | RMBS transaction that securitizes a portfolio of owner-occupied (85%) and BTL (15%) mortgage loans that are secured over properties in the U.K. This is the third RMBS transaction originated by Pepper group in the U.K. that we have rated. The first one was Polaris 2019-1 PLC. The loans in the pool were originated between 2018 and 2021 by Pepper Money and Pepper (UK) Ltd, a nonbank specialist lender. The collateral comprises complex income borrowers, borrowers with immature credit profiles, and borrowers with credit impairments, and there is a high exposure to self-employed borrowers and first-time buyers. |
| BPCE Master Home Loans FCT | July 30, 2021 | France | Prime | We assigned a 'AAA (sf)' credit rating to the €4.0 billion class A-2021-02 notes from BPCE Master Home Loans FCT, a securitization of a pool of up to €50 billion of French prime residential mortgage loans originated by Groupe BPCE. BPCE Master Home Loans is a multi-issuance, French RMBS program originally issued in 2014 with a five-year revolving period. BPCE is one of the largest participants in the French mortgage market. The historical performance of the lender's mortgage book has proven strong to date, with a very low arrears level. Under the transaction's eligibility criteria, at least 95% of the pool pays a fixed interest rate, and the notes pay fixed coupons. |
| Solitaire I B.V. | July 30, 2021 | Netherlands | Prime | The transaction is a RMBS that securitizes a €379.79 million pool of prime, owner-occupied residential mortgages located in Netherlands. This is the first securitization of mortgage loans from bunq B.V. Venn Hypotheken B.V. (24%), and ASR Levensverzekering N.V. (76%) originated the loans. Bunq is a challenger bank that launched end 2015 in the Netherlands and now has a full banking license. This transaction is the first of bunq's planned securitization program. The program has been designed to allow bunq to use securitized notes as collateral, in order to attract liquidity through the available European Central Bank facilities when required. |
| Tower Bridge Funding 2021-2 PLC | July 31, 2021 | U.K. | BTL | RMBS transaction that securitizes a portfolio of BTL and owner-occupied mortgage loans secured on properties in the U.K. The loans in the pool were originated between 2017 and 2021 by Belmont Green Finance Ltd. (BGFL), a nonbank specialist lender, via its specialist mortgage lending brand, Vida Homeloans. The collateral comprises complex income borrowers with limited credit impairments, and there is a high exposure to self-employed, contractors, and first-time buyers. Approximately 79.31% of the pool comprises BTL loans and the remaining 20.69% are owner-occupier loans. |
| Durham Mortgages B PLC | Aug. 20, 2021 | U.K. | BTL | S&P Global Ratings has assigned credit ratings to Durham Mortgages B PLC's class A, B-Dfrd, C-Dfrd, D-Dfrd, E-Dfrd, F-Dfrd, and X-Dfrd U.K. RMBS notes. At closing, Durham Mortgages B also issued unrated class Z and R notes. The transaction is a refinancing of the Durham Mortgages B PLC transaction, which closed in May 2018 (the original transaction). The loans are secured on properties in England, Wales, Scotland, and Northern Ireland and were originated between 1998 and 2008. The pool comprises buy-to-let (BTL) properties. The collateral performance has historically been better than our legacy BTL index. |
| Cheshire 2021-1 PLC | Sept. 10, 2021 | U.K. | Cheshire 2021-1 PLC is a RMBS transaction that securitizes a portfolio of £211.6 million owner-occupied and BTL mortgage loans secured on properties in the U.K. The transaction is a refinancing of the Dukinfield II PLC transaction, which closed in September 2016. We consider the collateral to be nonconforming based on the prevalence of loans to self-certified borrowers and borrowers with adverse credit history, such as prior county court judgments (CCJs), an individual voluntary arrangement, or a bankruptcy order. There is high exposure to interest-only loans in the pool at 92.7%, and 15.6% of the mortgage loans are currently in arrears greater than (or equal to) one month. | |
| Lanebrook Mortgage Transaction 2021-1 PLC | Sept. 21, 2021 | U.K. | BTL | RMBS transaction that securitizes a portfolio of £343 million BTL mortgage loans secured on properties in the U.K. The loans in the pool were originated between 2020 and 2021 by The Mortgage Lender Ltd., a nonbank specialist lender, under a forward flow agreement with its parent Shawbrook Bank PLC. |
| Together Asset Backed Securitisation 2021-1ST1 PLC | Sept. 22, 2021 | U.K. | Nonconforming | RMBS transaction, which securitizes a portfolio of up to £318 million first-lien mortgage loans, both owner-occupied and BTL, secured on properties in the U.K. Together Personal Finance Ltd., Together Commercial Finance Ltd., Blemain Finance Ltd., and Harpmanor Ltd. originated the loans in the pool between 2015 and 2021. Of the pool, approximately 9.6% of the loans were previously securitized in Together Asset Backed Securitization 2017-1 PLC, which was called before the closing date. |
| Dutch Property Finance 2021-2 B.V. | Sept. 24, 2021 | Netherlands | - | Dutch Property Finance 2021-2 B.V. is an RMBS transaction that securitizes a portfolio of €475.5 million BTL mortgage loans secured on properties in the Netherlands. Most of the loans in the pool were originated in 2020 and 2021 (69.9%). Splitting by originator, RNHB B.V., a non-bank specialist real estate lender, originated 73.9% of the pool, while Achmea via Syntrus Achmea Real Estate & Finance (SAREF) originated 25.2% of the loans, which RNHB then acquired in June 2021 (known as the acquired Trident loans). FGH Bank N.V. originated the rest of the portfolio. |
| Glenbeigh 2 Issuer 2021-2 DAC | Sept. 30, 2021 | Ireland | - | Glenbeigh 2 Issuer 2021-2 DAC is a RMBS transaction that securitizes a portfolio of €584.8 million loans secured by primarily interest only, BTL residential assets. The loans were originated primarily between 2006 to 2008 by Permanent TSB PLC (PTSB), one of the largest financial services groups in Ireland. The securitized portfolio was sold to Citibank N.A. as part of a wider loan sale in November 2020. The assets are serviced by Pepper Ireland. The assets are well seasoned, with the majority originated between 2006 and 2008, and the pool contains limited restructures. |
| Twin Bridges 2021-2 PLC | Sept. 30, 2021 | U.K. | BTL | RMBS transaction that securitizes a portfolio of BTLmortgage loans secured on properties in the U.K. The loans in the pool were originated between 2016 and 2021 by Paratus AMC Ltd., a non-bank specialist lender, under the brand of Foundation Home Loans. The collateral comprises first-lien U.K. BTL residential mortgage loans made to both commercial and individual borrowers. |
| Polo Funding 2021-1 PLC | Oct. 21, 2021 | U.K. | Second charge | RMBS transaction that securitizes a portfolio of £209.6 million second-and-subsequent-ranking consumer secured loans originated by Oplo HL Ltd. |
Related Research
- European Housing Market Inflation Is Here To Stay, Nov. 2, 2021
- S&P Global Ratings Publishes October 2021 Chart Book For EMEA Structured Finance, Oct. 22,2021
- Latest European Economic Snapshots Highlight The Continent's Faster-Than-Expected Restart, Sept. 29, 2021
- Credit FAQ: Social RMBS: Is The Pursuit Of Housing Equality A Risky Business?, Sept. 1, 2021
- Scenario Analysis: Potential Effects Of LIBOR Replacement On U.K. RMBS Ratings, Sept. 1,2021
- European RMBS Market Update Q2 2021, Aug. 16, 2021
- Economic Snapshots Indicate Europe Responding Quickly To The Grand Reopening, July 9, 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 |
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