Summary
- Our European RMBS indices track the performance to date of the transactions that we rate. Please refer to the summary below for the frequently asked questions on our methodology for compiling the index.
- Overall, European RMBS collateral performance in most European jurisdictions was stable quarter-on-quarter. Movements were visible in the U.K. buy-to-let (BTL) pre-2014 (total arrears and 90+ arrears) and in the Irish indices. In all cases, these movements are caused by changes in the index composition due to addition or removal of transactions (as clarified below).
- Prepayment rates have stabilized in the last quarter but remain high compared to pre-pandemic levels. The expectation of rate rises may see borrowers seek to refinance, although whether this would directly drive prepayments depends on whether the refinancing can be accommodated within transactions.
- Overall, in 2022 we expect performance to be broadly stable, though we consider that certain asset classes, notably legacy U.K. nonconforming collateral and Irish reperforming, may come under pressure as rate rises and/or cost of living rises hit borrowers who historically have had limited financial resilience.
Table 1
| Total Delinquencies | |||||
|---|---|---|---|---|---|
| (%) | Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 |
| All countries - index | 3.2 | 3.2 | 3.2 | 3.3 | 3.3 |
| France and Belgium | 0.5 | 0.4 | 0.4 | 0.4 | 0.4 |
| Italy | 1.8 | 2.0 | 2.3 | 2.5 | 2.7 |
| Ireland | 7.2 | 4.9 | 7.9 | 6.9 | 6.8 |
| Netherlands (excl. BTL) | 0.4 | 0.4 | 0.4 | 0.5 | 0.6 |
| Netherlands BTL | 1.0 | 1.1 | 1.3 | 1.1 | 1.5 |
| Portugal | 2.8 | 2.7 | 3.2 | 3.4 | 3.3 |
| Spain | 6.8 | 6.4 | 6.1 | 6.1 | 6.0 |
| U.K. prime | 0.9 | 1.0 | 0.9 | 0.9 | 0.9 |
| U.K. BTL | 2.9 | 1.8 | 1.8 | 2.7 | 2.9 |
| U.K. BTL - pre-2014 | 3.5 | 2.1 | 2.1 | 2.9 | 3.1 |
| U.K. BTL - post-2014 | 0.9 | 0.8 | 0.7 | 0.2 | 0.1 |
| U.K. nonconf | 11.9 | 12.6 | 13.1 | 12.6 | 12.5 |
| U.K. nonconf - pre-2014 | 13.2 | 13.1 | 13.7 | 12.8 | 12.7 |
| U.K. nonconf - post-2014 | 4.0 | 4.0 | 3.7 | 2.4 | 2.1 |
Table 2
| Annualized Prepayment Rate | |||||
|---|---|---|---|---|---|
| (%) | Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 |
| All countries - index | 10.0 | 10.0 | 10.4 | 10.0 | 9.8 |
| France and Belgium | 7.8 | 9.7 | 9.6 | 8.5 | 9.2 |
| Italy | 4.4 | 4.7 | 5.0 | 5.1 | 5.2 |
| Ireland | 7.3 | 6.7 | 6.8 | 6.4 | 6.0 |
| Netherlands (excl. BTL) | 11.7 | 11.8 | 11.4 | 11.7 | 11.3 |
| Netherlands BTL | 15.8 | 12.8 | 14.6 | 21.6 | 16.6 |
| Portugal | 5.9 | 5.9 | 5.6 | 5.2 | 5.0 |
| Spain | 4.3 | 4.1 | 4.1 | 4.1 | 4.6 |
| U.K. prime | 19.3 | 18.0 | 21.2 | 22.1 | 21.1 |
| U.K. BTL | 10.9 | 10.3 | 10.7 | 8.5 | 7.2 |
| U.K. BTL - pre-2014 | 9.8 | 8.8 | 9.1 | 8.0 | 6.7 |
| U.K. BTL - post-2014 | 15.2 | 15.9 | 16.6 | 13.0 | 12.2 |
| U.K. nonconf | 12.3 | 11.5 | 11.5 | 9.8 | 9.0 |
| U.K. nonconf - pre-2014 | 12.2 | 11.2 | 11.3 | 9.5 | 8.7 |
| U.K. nonconf - post-2014 | 13.0 | 16.1 | 14.9 | 21.1 | 20.2 |
Chart 1
Chart 2A
Chart 2B
Chart 3A
Chart 3B
Chart 4
Chart 5
Chart 6A
Chart 6B
Table 4
| New Ratings Activity As Of December 2021 | ||||
|---|---|---|---|---|
| Deal | Closing date | Country | Asset class | Noteworthy features |
|
Towd Point Mortgage Funding 2019-Granite4 PLC |
Oct. 20, 2021 | U.K. | Nonconforming | Refinance of a static RMBS transaction that originally closed in 2019. The transaction securitizes a portfolio of owner-occupied mortgage loans secured on properties in the U.K. The pool is unchanged from the pool backing the original issuance, although it has amortized to £2.557 billion as of the June 2021 portfolio reference date, down from £3.769 at closing in 2019. |
|
Dilosk RMBS No.5 DAC |
Oct. 21, 2021 | Ireland | Prime | RMBS transaction that securitizes a portfolio of owner-occupied (24%) and BTL (76%) mortgage loans. The loans in the pool were originated by Dilosk DAC, a nonbank specialist lender, under its ICS Mortgages brand over the last two years. The transaction includes up to 30% pre-funding, where the issuer can add loans up until the first interest payment date subject, to certain conditions. |
|
BPCE HOME LOANS FCT 2021 GREEN UoP |
Oct. 26, 2021 | France | Prime | French prime residential loans originated by BPCE Group, which is one of the largest participants in the French residential loan market. The receivables have been originated by participating "Caisses d'Epargne" and "Banques Populaires," which are part of BPCE Group for French borrowers. |
|
Glen Securities Finance DAC |
Oct. 27, 2021 | Ireland | Other | Static RMBS transaction that references a portfolio of €1,397 million owner-occupied and BTL mortgage loans originated by the Governor and Company of the Bank of Ireland, Bank of Ireland Mortgage Bank, and ICS Building Society, and secured over residential properties in Ireland. As of June 30, 2021, 3.4% (applying our methodology) of the pool is in arrears for greater than or equal to one month and 76.2% of the borrowers have had their loan restructured in the past. |
|
Castell 2021-1 PLC |
Nov. 10, 2021 | U.K. | Prime | RMBS transaction originated by Optimum Credit Ltd. that securitizes a portfolio of £308.9 million second-ranking mortgage loans secured over properties in the U.K. Most of the pool is considered to be prime, with 88.9% originated under Optimum's prime product range. The transaction includes a 11.7% prefunded amount until the first interest payment date. |
|
London Wall Mortgage Capital PLC Fleet 2021-02 |
Nov. 11, 2021 | U.K. | BTL | This transaction is the fifth securitization under the London Wall Mortgage Capital PLC program. The loans in the pool were originated between 2015 and 2021 by Fleet Mortgages Ltd., a nonbank specialist BTL lender. The transaction includes a portion of loans that were originally securitized in the Series Fleet 2016-01 transaction. |
|
Pierpont BTL 2021-1 PLC |
Nov. 19, 2021 | U.K. | BTL | Static RMBS transaction that securitizes a portfolio of BTL mortgage loans secured on properties in the U.K. LendInvest PLC originated the loans in the pool between March 2019 and August 2021. The securitized loans are part of a forward flow agreement between JPMorgan Chase Bank, N.A. (London Branch) and LendInvest. |
|
Finsbury Square 2021-2 PLC |
Nov. 29, 2021 | U.K. | Prime | Revolving RMBS transaction that securitizes a portfolio of owner-occupied and BTL mortgages in the U.K. The loans in the pool were originated by Kensington Mortgages Company Ltd. (KMC), a nonbank specialist lender. KMC focuses on complex credit profile and income borrowers, whose credit performance we consider to be more vulnerable to economic stress. The transaction has a prefunding mechanism. |
|
Tudor Rose Mortgages 2021-1 PLC |
Dec. 10, 2021 | U.K. | BTL | The transaction is a straight refinancing of all loans in Tudor Rose 2020-1 PLC, which has demonstrated a strong credit performance with a low arrears level over time and limited losses. Borrowers are professional landlords who have been operating for a minimum of two years and managing at least two properties. Close to two-thirds of the mortgage portfolio is located in Greater London. |
|
Harbour No.1 PLC |
Dec. 13, 2021 | U.K. | Nonconforming/reperforming | Static RMBS transaction that securitizes a portfolio of £503.9 million owner-occupied and BTL mortgage loans secured on properties in the U.K. from three different sub-pools across 18 originators. The pool is well seasoned. Almost all the loans are first-lien (99.9%) U.K. owner-occupied and BTL residential mortgage loans, with a minimal amount of second-lien (0.1%). Of the final pool, 36% is in arrears, with 25.6% of that portion in severe arrears (90+ arrears). Of the pool, 33.6% is considered reperforming. |
|
Tyne Funding No. 1 PLC |
Dec. 22, 2021 | U.K. | BTL | Static RMBS transaction that securitizes a portfolio of £282.7 million BTL mortgage loans secured on properties in England and Wales. The loans in the pool were originated between 2015 and 2021 by Newcastle Building Society. The collateral comprises loans granted to BTL landlords, none of whom have an adverse credit history. Two-thirds of the mortgage portfolio is located in Greater London. |
Summary Of Methodology For Our European RMBS Index
What is it included in the European RMBS Index?
We include a transaction once nine months have elapsed since the closing date. This is because we expect that performance developments of a transaction are likely not to be visible immediately after closing. As the index is current balance weighted, including transactions with less than nine months of performance will lower the denominator of the index and may give an overly positive impression of performance.
Are esoteric RMBS transactions included?
We assess this on a case-by-case basis. By way of example, equity release (reverse mortgage) nonperforming transactions backed by residential mortgages are excluded, while reperforming RMBS transactions are included.
What is the data source?
It is compiled form investor reports, and as such is based on each transaction's definition of arrears.
Is it loan count or "dollar" weighted index?
The index is calculated as the current balance of loans in each arrear status (as reported in the investor reports), divided by the current balance of each transaction (as reported in the investor reports). As such, in some countries where there are a limited number of transactions forming the index, larger transactions will drive the overall group.
When a transaction redeems, how does it affect the index? Does it affect the past quarter(s)?
When a transaction redeems it does not contribute to the index beyond that point. It has no effect on reported values for previous quarters.
When do we cut off the index for a given quarter?
The cut off is based on the period covered in investor reports. For example, if the index covers the period up to fourth-quarter 2021, for a quarterly reporting transaction only collateral data with a cut- off between Oct. 1, 2021, and Dec. 31, 2021 is included. For transactions that report monthly, we use the latest report from the quarter.
Both pre- and post-2014 indices are presented. How is this classification performed?
This is based on the origination date of the assets. If a pool of assets is split equally between pre- and post-2014 vintages, we will assess on a case-by-case basis whether it is included in the pre- or post-2014 index.
Why do prior quarter's numbers sometime change?
There are two main reasons:
- Data can be amended by the servicer/party providing the investor report.
- Newer data for the most recent quarter is available. For example, in a transaction that reports monthly, if we receive data until November 2021 when producing the fourth-quarter 2021 index, we will use the data up until that date. However, if we then receive December 2021 data when producing the following quarter's index, we will backfill fourth-quarter 2021 for that transaction with the December 2021 data.
How are transactions that contain a mixture of BTL and owner-occupied collateral classified?
For countries with separate BTL and owner-occupied indices, for example U.K. and Netherlands, we typically classify the transaction based on which portion of the collateral is the largest at the issuance date. For example, if a pool had 60% BTL collateral and 40% owner-occupied collateral at closing, it would form part of the BTL index. If the relative split of BTL and owner-occupied reversed due to prepayment or amortization, we would not typically change the classification.
How is nonconforming categorized?
There is no standard market definition of nonconforming. Broadly speaking, nonconforming collateral does not meet the definition of prime. This is typically due to the pool having material exposures to borrowers with previous adverse credit such as prior mortgage arrears and country court judgements, and/or significantly complex income. The assessment of whether a pool is nonconforming can be subjective and is disclosed in related ratings commentary.
Where do second-charge transactions appear in the index?
They are in based on the categorization of the transaction. We do not include them as s separate index as currently there are just a handful of transactions.
Related Research
- The Future Of U.K. Nonbank Mortgage Lending And How It Will Affect RMBS, Feb. 9, 2022
- European RMBS Outlook 2022: Performance And Issuance At A Crossroads, Jan. 27, 2022
- Credit FAQ: How We Analyze Small Ticket Commercial Real Estate Assets In European Structured Finance, Jan. 19, 2022
- Latest European Economic Snapshots Show A Robust Expansion Ahead, Dec. 6, 2021
- S&P Global Ratings Publishes December 2021 Chart Book For EMEA Structured Finance, Dec. 2, 2021
- High Inflation May Dampen, Not Derail, The U.K.'s Economic Recovery Momentum In 2022, Report Says, Nov. 30, 2021
- European RMBS Market Update Q3 2021, Nov. 24, 2021
- European Housing Market Inflation Is Here To Stay, Report Says, Nov. 2, 2021
- European RMBS Market Update Q2 2021, Aug. 16, 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 |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.