News
Mortgage funding facility formed
Natixis has established a secured funding facility in the form of an SPV, dubbed Rembrandt Dutch Mortgages. The facility will fund mortgage loans, with the borrower exiting the vehicle via a securitisation or a whole loan portfolio sale.
Rembrandt Dutch Mortgages will purchase loans funded through the issuance of senior and junior variable funding notes (VFNs), provided a stop purchase event has not been triggered. The SPV is established under Dutch law and the notes are collateralised by Dutch prime residential mortgage loans originated by Fenerantis, through the brand name Merius.
The €180m senior VFNs are rated double-A (high) by DBRS, while the junior VFNs are unrated. The coupon payable on the senior notes is mid-swaps plus 1.10%, with a step-up coupon of mid-swaps plus 1.65% payable after the end of the commitment period 24 months from closing. Fenerantis is part of Credit Management and Investor Solutions (CMIS Group). The mortgage portfolio will also be serviced by Fenerantis through a sub-servicing agreement with Adaxio.
Fenerantis and Merius were launched in partnership with Natixis to provide European institutional investors with access to newly originated prime NHG and non-NHG Dutch residential mortgages. Fenerantis is a new originator (originating since 4Q16) and consequently there is limited historical performance data.
DBRS highlights that the transaction has portfolio and credit support, with the issuer being able to purchase mortgage loans funded through the issuance of senior VFNs two years from the closing date. Furthermore, the senior VFNs benefit from 10% credit enhancement from subordination of the junior VFNs.
The senior notes have additional credit support until the issuer has purchased €50m of mortgages, as €5m must be purchased via the proceeds of the junior VFN before proceeds from the senior VFN can be used. Additionally, the issuer must pass portfolio tests prior to the issuance of senior VFNs and the issuer cannot draw on the facility if the portfolio covenants or performance triggers are breached.
These triggers require that one-month plus delinquencies shall not exceed 1.8% and three-month plus delinquencies shall not exceed 1%, which is relatively tighter than the conditions included in several Dutch transactions. The transaction must also be performing, with the reserve fund replenished to the target level, in order to allow for further drawing on the senior notes.
The portfolio covenants also state that no loans will be granted to borrowers with a negative Bureau Krediet Registratie (BKR) code. A borrower is given a BKR code following two to four months of delinquencies, dependent upon credit type. The covenants also state that a maximum of 10% of the loans can be granted to self-employed borrowers.
Additionally, DBRS notes that unlike typical Dutch transactions, loans with associated repayment vehicles will not be included in the warehouse and the mortgage loans will repay on an annuity, linear or interest-only basis. Finally, the maximum concentration of interest-only loans is lower than typical RMBS, at 45%.
12/10/2017 15:21:06
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