Santander RMBS shows market is on the mend

Santander has issued a £2.5bn residential mortgage-backed securitisation through the Holmes Master Trust programme.

The deal, which is named Holmes Master Issuer Series 2011-3, is made up of five classes of notes, four of which have been assigned a provisional AAA rating by Moody’s.

It is the 20th issuance from Santander’s Holmes programme, which is worth a total of £11bn. The deal is backed by a portfolio of loans with an average LTV of 66.4% and 2.04% of its mortgages more than 90 days in arrears.

Industry consultant Mehrdad Yousefi says the securitisation market is improving but is still held back because some investors perceive it as risky after having had their fingers burnt in the crisis.

He adds there were fears the securitisation market would be affected by the Independent Commission on Banking’s proposals for ring-fencing banks’ retail activities.

Initially it was not clear whether securitisations would fall within the ring-fence and whether funding generated by RMBS deals could be used to finance mortgages.

Yousefi says: “Now the ICB has published its final report, I do not think its proposals will adversely affect the securitisation market or the funding of mortgages as it allows banks to issue securitisations from within the ring-fence.”

An ICB spokeswoman confirms that under the final proposals banks can issue securitisations from within their retail division, but any trading of other firms’ securitisations fall into the riskier investment division.