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Capital Markets

Securitization: BAML cleans house with non-conforming RMBS

Trade may be Basle III-driven; Reverse enquiry likely

Bank of America Merrill Lynch (BAML) came to the market in May with a surprise UK non-conforming RMBS transaction. With this market having been dead since the onset of the crisis in 2007, the appearance of a deal – and a large one at that – was a notable event. But to herald the transaction as evidence of investor demand for non-prime UK RMBS might prove to be a triumph of hope over reality.

The deal itself, Moorgate Funding 2010-1, is £744.3 million ($1.06 billion) in size – a huge deal for this asset class. "I would be very surprised if there was £750 million of public market appetite for this deal," says an RMBS specialist. "You can’t do much more than that in prime."

Details on the mortgages backing this deal are scarce, and BAML declined to speak to Euromoney about the deal. The loans are, however, understood to have been originated by three of Merrill Lynch’s sub-prime subsidiaries: Mortgages plc, Wave Lending and Edeus Mortgage Creators. All of these firms have had a rough ride during the past few years.

Fitch UK non-conforming loss index

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