Precise Mortgages is seeking to raise £164 million of funding, with the launch off its first ever securitisation.
Charter Court Financial Services (CCFS), acting under its brand name Precise Mortgages, is launching a public RMBS programme commencing in December 2013 with Credit Suisse appointed as Arranger and Lead Manager.
The securitisation programme is called Precise Mortgage Funding No.1 plc.
The Fitch and S&P rated transaction has a provisional size of £163.75 million including a prefunding element of 20 per cent. The deal, to be marketed in November, will target a broad investor base and is expected to close in the first half of December.
• All loans in the transaction have been originated by Precise Mortgages in 2013;
• All loans have been subject to a combination of automated and manual underwriting;
• All loans have been credit scored using a suite of Experian scorecards;
• All home owner loans are income verified and affordability has been stressed to reversion rate + 2 per cent;
• Buy to let loans have a minimum interest coverage ratio of 125 per cent with the average being 149 per cent; and
• No loans are currently in arrears or have ever been in arrears since origination.
CCFS, acting under its brand name Exact Mortgage Experts, shall retain servicing of the portfolio. Exact is a premium Fitch rated UK third-party mortgage administrator with Fitch ratings of RSS2- for its Special Servicing and RPS3+ for Primary Servicing.
Sebastien Maloney, Chief Financial Officer of Precise Mortgages, commented: “The launch of our securitisation programme is positive news for both investors and borrowers as the diversification of our funding base will allow us to extend more loans to credit worthy individuals while offering institutional investors an opportunity to participate in a programmatic shelf.”
FTICH REPORT
A Fitch report states that: “The transaction is an RBMS securitisation of near-prime residential mortgages that were originated by Charter Court Financial Services (CCFS), trading as Precise Mortgages (Precise) in the UK (excluding Northern Ireland). The loans are serviced by Charter Court Financial Services Limited (Exact).
“The loans in the portfolio are post-crisis originations that have been underwritten using a near-prime criterion. Borrowers can be accepted with limited prior adverse credit history, but the levels of prior adverse credit in the pool are small compared with the levels seen during the peak of the economic cycle in 2006/2007.”
Although Precise Mortgages only began originating loans in 2010, and as such could provide only limited loan performance data, the agency believe that in this instance it was adequately offset by its stringent underwriting criteria and the controls it has in place. Normally, Fitch would consider applying an increase to the base default probabilities when data are limited.
The report continues: “Precise provided Fitch with a loan-by-loan data template. All relevant fields were provided in the data tape, with the exception of prior mortgage arrears, where Precise was unable to differentiate between loans having had one to six months of prior arrears and those having had seven to 12 months prior arrears. Performance data on historical static arrears was provided for all loans originated by Precise, but the scope of the data was limited by the small origination volumes (around £400 million of owner-occupied, buy-to-let and short-term mortgage loans) and the length of available history (the first Precise origination was in early 2010).
“On account of the limited originating history of Precise, they were unable to provide loan-level data on sold repossessions for any loans they had originated, given that none of their loans have as yet suffered any repossessions. It however provided a data tape in Fitch template format for 198 sold repossessions that have been serviced by Exact. Given that the sample did not contain loans originated by Precise, it was difficult for the agency to derive any solid conclusions from the data provided with respect to the expected discounts for sold repossessions. Due to this limitation, the agency made a conservative 30 per cent assumption of the quick sale adjustment (QSA), which was higher than Fitch's original base case assumption of 22 per cent. Market value decline (MVD) assumptions were adjusted upward to reflect this. Fitch carried out a file review of selected loans in the pool and found no material issues.”
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