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Kensington-parent Investec tests out securitisation
20 September 2010
Investec, the South African bank is about to test the market with a £250m securitisation of "non-standard" mortgages, including some sub-prime loans, according to the Financial Times. The portfolio of loans, expected to be launched within the next six weeks, comprises standard prime loans, "non-standard" mortgages, principally self-certified mortgages, and a portion of sub-prime. If successful, the deal would mark the first time that sub-prime mortgages have been securitised in Europe since the financial crisis, although Bank of America Merrill Lynch reportedly laucnhed a UK subprime securitisation worth close to £1bn over the summer, but lack of demand forced it to withdraw. Self-cert loans, a big market in the run-up to the crisis, were designed for self-employed people but have been criticised after the discovery of widespread fraud. The FT suggested this deal was further evidence the securitisation market is steadily recovering, after the Royal Bank of Scotland announced a £4.7bn securitisation last week, after Lloyds jumped in first a year ago. For banks, securitisation - the process of bundling loans into new bonds backed by the repayments - is a crucial source of financing. Before the financial crisis, a large chunk of UK mortgages were securitised, freeing up banks' balance sheets to do more lending. Investec bought Kensington, a specialist mortgage lender in the summer of 2007. Kensington was unavailable to comment at this time. Published by Mortgage Solutions
