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 stabilized in the first quarter of 2021 almost at the pre-COVID-19 level, even if performance data continue to reveal its effect in certain jurisdictions, such as Ireland, Spain, and within U.K. nonconforming transactions.
- One notable performance trend is perhaps in U.K. nonconforming RMBS originated after 2014, which recorded a 0.64% increase in total arrears in the first quarter of 2021, although the increase in 90+ delinquencies is currently limited. The biggest year-on-year increase in delinquencies recorded was in Ireland where total delinquencies increased to 8.7% from 6.8.%. This continues the trend of the previous quarter and partly reflects the nature of the collateral within the index, which has a weighting toward reperforming collateral but also reflects the conclusion of COVID-19 related payment holidays in Ireland at the end of December.
- Prepayment rates continued to increase and are at the March 2017 level (about 10%). Generally speaking, lows were recorded in second-quarter 2020 as severe lockdowns all but froze property sales and lenders withdrew products. As lockdowns were eased and mortgage products reintroduced, reduction in prepayment rates have reversed.
- Prepayment rates may be volatile throughout 2021 as COVID-19 measures mean moving or purchasing a house may become varyingly harder and easier throughout the year. In addition, origination volumes and therefore prepayments are less likely to be affected by COVID-19 measures in countries where automation, particularly of the valuation process, is more embedded in the origination process. The low interest rate market feeding through to historically low fixed rates in some countries will act as a spur to borrowers to refinance and for those deals that do not retain loans changing their rate, will increase prepayments.
- We expect RMBS collateral performance to come under pressure in the second half of 2021 as government support in various forms, including payment holidays and salary contributions, is gradually withdrawn. However, structural protections mean most transactions are robust, and we have only taken negative rating actions in limited instances.
Table 1
| Total Delinquencies | |||||
|---|---|---|---|---|---|
| (%) | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 |
| All countries - index | 3.3 | 3.3 | 3.3 | 3.6 | 3.2 |
| France and Belgium | 0.4 | 0.4 | 0.5 | 0.6 | 0.6 |
| Ireland | 8.7 | 6.8 | 6.4 | 6.0 | 5.9 |
| Italy | 2.6 | 2.7 | 3.2 | 4.1 | 2.6 |
| Netherlands | 0.5 | 0.6 | 0.6 | 0.7 | 0.7 |
| Portugal | 3.4 | 3.3 | 3.4 | 3.7 | 3.8 |
| Spain | 6.1 | 6.0 | 5.9 | 6.1 | 5.8 |
| U.K. BTL | 2.9 | 3.1 | 3.3 | 3.8 | 3.6 |
| U.K. BTL - Pre 2014 | 2.9 | 3.1 | 3.2 | 3.5 | 3.2 |
| U.K. BTL - Post 2014 | 0.2 | 0.1 | 0.3 | 0.4 | 0.1 |
| U.K. nonconforming | 12.1 | 12.1 | 12.2 | 13.4 | 11.9 |
| U.K. nonconforming - pre 2014 | 12.8 | 12.7 | 12.1 | 13.4 | 11.7 |
| U.K. nonconforming - post 2014 | 1.5 | 1.3 | 1.6 | 2.1 | 0.8 |
| U.K. prime | 0.9 | 0.9 | 0.8 | 0.8 | 0.8 |
Table 2
| Annualized Prepayment Rate | |||||
|---|---|---|---|---|---|
| (%) | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 |
| All transactions - Index | 10.0 | 9.8 | 9.0 | 8.6 | 9.0 |
| France and Belgium | 8.5 | 9.2 | 9.4 | 10.7 | 9.3 |
| Ireland | 6.1 | 6.0 | 5.2 | 3.8 | 4.7 |
| Italy | 5.2 | 5.1 | 3.6 | 3.6 | 4.2 |
| Netherlands | 12.2 | 11.6 | 11.7 | 10.6 | 9.7 |
| Portugal | 5.2 | 5.0 | 4.7 | 4.6 | 5.8 |
| Spain | 4.1 | 4.6 | 3.9 | 2.5 | 3.3 |
| U.K. BTL | 8.2 | 7.4 | 6.7 | 5.7 | 8.1 |
| U.K. BTL - pre 2014 | 8.0 | 6.7 | 6.3 | 5.7 | 8.1 |
| U.K. BTL - post 2014 | 11.9 | 13.2 | 14.9 | 5.1 | |
| U.K. nonconforming | 9.8 | 8.9 | 8.0 | 7.1 | 9.6 |
| U.K. nonconforming - pre 2014 | 9.5 | 8.7 | 7.9 | 6.9 | 9.5 |
| U.K. nonconforming - post 2014 | 18.9 | 16.0 | 16.5 | 14.9 | 14.9 |
| U.K. prime | 22.1 | 21.1 | 18.4 | 16.8 | 18.7 |
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Table 4
| New Ratings Activity As Of Q1 2021 | ||||
|---|---|---|---|---|
| Deal | Closing date | Country | Asset class | Noteworthy features |
| Hops Hill No.1 PLC | Jan. 26, 2021 | U.K. | RMBS BTL | Inaugural BTL transaction from Keystone Property Finance totaling £337 million of prime first lien U.K. BTL loans. |
| BPCE Master Home Loans FCT | Jan. 29, 2021 | France | RMBS prime | It is revolving and as a result, the pool's credit quality could deteriorate. In order to capture the pool's potential deterioration over the replenishment period, we have assumed a stressed weighted-average foreclosure (WAFF) and weighted-average loss severity (WALS). |
| Atlas Funding 2021-1 PLC | Feb. 1, 2021 | U.K. | RMBS BTL | The loans in the pool were originated between 2018 and 2020 by Lendco Ltd., a non-bank specialist lender. Even though it is not specifically bound by the Prudential Regulatory Authority's underwriting guidance on BTL loans, it adheres to its principles. |
| Shamrock Residential 2021-1 DAC | Feb. 4, 2021 | Ireland | RMBS reperforming | This is portfolio of €421.1 million loans. The securitization comprises two purchased portfolios which aggregated assets from seven Irish originators. |
| Dilosk RMBS No.4 DAC | Feb. 10, 2021 | Ireland | RMBS prime | The pool was originated by Dilosk DAC, a nonbank specialist lender, under its ICS Mortgages brand over the last two years. While Dilosk was established in 2013, it has only been originating BTL mortgages since 2017 and owner-occupied mortgages since late 2019. This is the issuer's first securitization of owner-occupied mortgages. |
| Stratton Mortgage Funding 2021-1 PLC | Feb. 12, 2021 | U.K. | RMBS nonconforming | A portfolio of £444.7 million loans. We estimate 15.1% of loans as reperforming. As the entire history of performing arrangements over the past three years is not available to us, we factor this deficiency in an elevated originator penalty. However, thanks to this proactive servicing we were able to see considerable improvements in the pool's performance over the recent past. |
| Durham Mortgages A PLC | Feb. 19, 2021 | U.K. | RMBS nonconforming | The transaction is a refinancing of the Durham Mortgages A PLC transaction, which closed in May 2018 (the original transaction). |
| Twin Bridges 2021-1 PLC | March 3, 2021 | U.K. | RMBS BTL | Twin Bridges 2021-1 is a static RMBS transaction that securitizes a portfolio first lien of BTL mortgage loans secured on properties in the U.K. The pool totaled £299.8 million and the loans were originated by Foundation Home Loans. |
| Canada Square Funding 2021-1 PLC | March 10, 2021 | U.K. | RMBS BTL | Fourth transaction from the Canada Square series totaling £244.6 million. The transaction like its predecessor deals consists of originations from Fleet Mortgage, Landbay Partners, Zephyr Homeloans, but also Hey Habito which is seen in a S&P rated transaction for the first time. |
| Jupiter Mortgage No.1 PLC | March 10, 2021 | U.K. | RMBS BTL | A transaction of legacy UKAR loans, predominantly seasoned BTL BTL loans. |
| Stratton Mortgage Funding 2021-2 PLC | March 10, 2021 | U.K. | RMBS BTL | A transaction of legacy UKAR loans, predominantly seasoned BTL BTL loans. |
| Together Asset Backed Securitisation 2021-CRE1 PLC | March 15, 2021 | U.K. | RMBS BTL | Inaugural "mixed use" and "commercial" transaction from Together. |
| Glenbeigh 2 Issuer DAC | March 23, 2021 | U.K. | RMBS BTL | Glenbeigh is a static Irish RMBS transaction that securitizes a portfolio of €297.6 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. |
| Green STORM 2021 B.V. | March 25, 2021 | RMBS prime | Fifth transaction from the Green Storm shelf, a transaction comprising €526 million secured on properties with an EPC rating of A, B, and C with an anticipated improvement of two notches. | |
| Tower Bridge Funding 2021-1 PLC | March 25, 2021 | U.K. | RMBS BTL | A portfolio of BTL and owner-occupied mortgage loans secured on properties in the U.K originated by Belmont Green between 2016 and 2021 via its specialist mortgage lending brand, Vida Homeloans. The transaction includes a 23.5% prefunded amount. |
| Trinity Square 2021-1 PLC | March 25, 2021 | U.K. | RMBS Nonconforming | Trinity Square 2021-1 PLC is a static RMBS transaction that securitizes a portfolio of £1.14 billion owner-occupied and BTL mortgage loans secured on properties in the U.K. The transaction is a refinancing of the Trinity Square 2015-1 PLC and Trinity Square 2016-1 PLC transactions. |
| ELIDE II FCT Compartiment 2021-1 | March 25, 2021 | France | RMBS prime | RMBS transaction backed by prime French residential mortgage loans originated by Bred Banque Populaire (BPCE Group). Portfolio amounts to almost €3 billion of fixed interest rate assets concentrated in Ile de France, Normandy, and overseas territories with a high share of civil servants. No reserve fund will be funded at closing, only if the servicer breaches a rating trigger. |
| Dutch Property Finance 2021-1 B.V. | March 31, 2021 | Netherlands | RMBS other | Sixth issuance in the DPF series consisting of loans secured on €525.8 million residential BTL, commercial, and mixed properties, with an average loan amount of €277,000. |
| Retiro Mortgage Securities DAC | March 31, 2021 | Spain | RMBS nonperforming | A Spanish nonperforming (NPL) and real-estate-owned properties (REO) transaction. The total portfolio is split in four subpools. There are three servicers and two master servicers in the transaction. We only rated the class A1 notes. |
Related Research
- Economic Research: Why The U.K.'s Worse Recession Should Turn Into A Stronger Recovery, May 12, 2021
- Economic Research: U.K. Recovery: Delayed But Stronger, May 9, 2021
- European Economic Snapshots Say Conditions Are In Place For A Strong Rebound, April 28, 2021
- Economic Outlook Europe Q2 2021: The Path To A Strong Restart, March 25, 2021
- Europe's Housing Market Will Chill In 2021 As Pent-Up Pandemic Demand Eases, Feb. 22, 2021
- European Structured Finance Market Accelerates Transition From LIBOR, Feb. 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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