UK insurer Aviva and US investor Waterfall Asset Management have securitized equity release mortgages. They issued a total of £1bn in notes.
This is the largest ever non-US home equity release loan securitization deal. All the mortgages in this deal are in the UK.
Aviva is the loan originator. Aviva also bought the top tranches of the deal.
Waterfall Asset Management is the transaction sponsor – they hold the first loss risk through the junior notes in the deal. Waterfall is a specialist ABS investor with $13bn AUM.
Equity release mortgages are for older people. The mortgage provider gives the homeowner cash today in return for repayment in the future – usually when the homeowner dies or goes into long-term care.
There are two types of home equity release mortgage – lifetime mortgages and home reversion plans.
In a lifetime mortgage, the homeowner gets a lump sum today, and then interest accrues on that lump sum until the homeowner dies or goes into long-term care. At this point, the principal and accrued interest is repaid – usually from the sale of the home.
In a home reversion plan, the homeowner sells a percentage of their home to the mortgage provider, at a discount to the market price of the property. The provider then gets their share of the proceeds from the sale of home. The discount is how the provider covers their interest cost and profit over the life of the mortgage.
This deal is solely lifetime mortgages. The homeowners in the portfolio are between 55 and 103 years old.
The deal is rated by Moody’s and ARC. The top tranche is Aa2 (Moody’s) / AA+ (ARC).
The arranger and lead manager was Citi. The issuing SPV is Lifetime Mortgage Funding 1 PLC.