L
As far as I can determine, EBSMF is a subsidiary of EBS established as a special purpose vehicle for a particular type of mortgage securitisation (asset covered securities, also known as "covered bonds"). They're a little different from other mortgage securitisations, in that the asset pool is dynamic - i.e. if you stop paying your mortgage, it'll be moved out of the asset pool because it's now non-performing; the whole thing is actively managed. It's a very different form of securitisation from the US type which helped precipitate at least part of the credit crunch: with asset covered securities, the investor is very safe indeed, which allows the issuer to give a relatively low coupon.
You're right: the conditions of the bond set out maximum LTV ratios based on "prudent market value", and non-performing mortgages must be removed from the pool. That does leave the on-books lending profile having a higher proportion of the lender's riskier loans. As a corollary, that probably means that when these securitisations are done, the originating lender should ensure that their bad debt provision is at least maintained (making it a higher % of the overall lending) to reflect the fact that the mortgages moved to the special purpose vehicle have been assessed as having lowest to negligible default risk.I presume that they'd hardly put what they consider risky mortgages into this vehicle?
JD
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?