A review of securitisation activity over the past seven days

Transaction of the week
Blackstone is marketing an inaugural US$264.5m forward-mortgage RMBS featuring unique collateral characteristics pertaining to underwriting and property concentration. Dubbed FWD 2019-INV1, the transaction is backed by 1,724 first-lien, fixed-rate investment-purpose mortgages, originated mostly by Finance of America (SCI 26 June).

The collateral comprises residential mortgage loans secured by non-owner-occupied properties, with 58.7% of the mortgages backed by single-family residences, 9.2% planned-unit developments, 6.3% condominiums and 25.8% two-to-four-family homes. All of the loans were originated for borrowers intending to use the property for business or commercial purposes.

The pool was primarily underwritten using FICO or LTV ratios and about 66.5% of the loans are underwritten to actual or estimated rental incomes, while around 33.5% of the loans were underwritten to a borrower's debt-to-income (DTI) ratio. All are exempt from qualified mortgage/ability-to-repay rules.

While securitisations with 100% investment properties have existed for several years in the single-family rental (SFR) securitisation sector, S&P notes that this transaction is more aligned with an RMBS. This is because of the diversity of individual underlying loans, multiple property operators and a focus on borrower FICO scores and LTVs.

The rating agency adds that FWD 2019-INV1 does not include the same provisions and characteristics often seen in SFR securitisations, such as the substitution of properties and CMBS-like features. Furthermore, S&P says that the collateral in this RMBS is unique, largely due to underwriting methods and investor property concentration.

Other deal-related news

• The EIF is taking on the risk of Banco BPM's €55m mezzanine guarantee in connection with the Italian lender's first capital relief trade, referencing a portfolio of midcap corporate loans. The regulatory capital that will be released is enough to fund €330m of SME lending (SCI 28 June).
• The UK mortgage market is furiously price competitive, with ring-fenced high street banks crowding out challenger banks and non-bank lenders. At the same time, the concurrence of TFS refinancing and call dates of outstanding transactions is increasing the diversity of the UK RMBS sector (SCI 28 June).
• The JUNO (ECLIPSE 2007-2) CMBS failed to file its financial statements for 2017, together with its annual return by 21 June, as required by the Companies Registration Office (see SCI's CMBS loan events database). The issuer has a further 28 days to submit its audited financial statements, but its auditors have advised that they cannot give any assurance that the statements will be completed within this extended period.
• Scope notes that the introduction of a ReoCo in the Belvedere SPV will not, in and of itself, result in a reduction or withdrawal of the current ratings of the class A notes (SCI 28 June). The agency adds that the implementation of the ReoCo could be positive for the issuer, as the ReoCo can add value to the properties and re-sell them on the market with a profit, therefore increasing recoveries.

Regulatory round-up

• The securitisation market now appears to be embracing the new Securitisation Regulation and adapting to the regime, following uncertainty over technical standards in Q1. Nevertheless, market participants are still grappling with practical challenges, whose solution remains elusive (SCI 28 June).
• The Australian Office of Financial Management (AOFM) has released for public comment its draft guiding investment principles for Australian Business Securitisation Fund investment. The recommendations are intended to be principles-based rather than prescriptive and will be used by the AOFM for identifying transactions that meet the government's primary objective of increasing the availability of finance to SMEs and contributing to the development of market infrastructure that facilitates securitisation of SME loans (SCI 24 June).
• Barclays, in partnership with Annaly Capital Management, has released a study entitled 'GSE Reform: Unfinished Business', which lays out steps that policymakers might take to reform Fannie Mae and Freddie Mac. Among the key takeaways of the report is that a revolving credit risk transfer structure could enable the GSEs to shed credit risk on most future production, thereby avoiding execution risk while protecting the taxpayer (SCI 27 June).
• The UK FCA, the US CFTC and the SEC have announced that they will make "collaborative efforts" to explore ways to address industry concerns over manufactured credit events and foster transparency, accountability, integrity, good conduct and investor protection in the credit derivatives markets. Such collaborative efforts will not preclude other appropriate actions by the respective agencies, which note in a statement that opportunistic CDS strategies raise various issues under securities, derivatives, conduct and antifraud laws, as well as public policy concerns (SCI 26 June).

Data

Pricings
Consumer ABS accounted for the majority of last week's pricings. Among the prints were a handful of European securitisations.

Last week's ABS new issues comprised: US$300m College Avenue Student Loans 2019-A, €430m Columbus Master Credit Cards 2019-01, US$325m Mariner Finance Issuance Trust 2019-A, US$339.25m Marlette Funding Trust 2019-3, €3.45bn SC Germany Mobility 2019-1, US$548m Silver Aircraft Lease Investment and €2.26bn Siena PMI 2016 - Series 2. Meanwhile, the CLO prints included US$354.9m Battery Park CLO, US$504m CarVal CLO III, US$451.8m Fortress Credit BSL CLO VII, US$466.60m Golub Capital Partners CLO 35(B) (refinancing), €382.20m Providus CLO III and US$509.1m Woodmont 2019-6. The US$1.02bn CHC 2019-CHC, €276.5m EOS (ELoC 35), US$914m GSMS 2019-GC40 and US$481m JPMCC 2019-MFP made up last week's CMBS pricings, while the sole RMBS print was £638m Paragon Mortgages No. 26.

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