The Mortgage Lender has signed a multi-year purchase agreement today (8 July) with TwentyFour Asset Management, backing its launch into the UK intermediary market next Monday.
A stock exchange announcement this morning confirmed UK Mortgages Limited will invest in profit participating notes issued by a dedicated acquisition company, which will purchase owner-occupied mortgage loans on an ongoing basis from TML.
UKML is a listed closed-ended fund which invests in a diversified portfolio of UK residential mortgages, launched last year and run by TwentyFour.
Since its launch, the fund has sought a mortgage origination partner to facilitate an ongoing flow of mortgage loans that fit the investment policy.
The initial capital commitment will enable the purchase of £250m of mortgage loan production over a 12 to 14 month period, with the intention to deploy fresh capital on an on-going basis.
The expectation is for a portfolio of geographically diversified loans with an average loan-to-value of 75 per cent. TML will be the originator and legal title holder of the mortgages whilst acting as servicer for the mortgage borrowers.
The product suite will go live on 11 July, with The Mortgage Lender accepting broker registrations, decision in principle requests and processing applications on its website.
To supplement UKML’s funding for the ongoing acquisition of the mortgage loans, corporate funding has established a revolving loan financing facility with The Royal Bank of Scotland, available for up to two years, providing flexibility on the timing of the securitisation.
It is expected that the capital usage in the initial 14 months from investment will be around £72m, depending upon securitisation execution, representing the deployment of approximately 30 per cent of UKML’s initial capital raise.
Trevor Pothecary, chief executive of The Mortgage Lender, said he sees this transaction as the start of a long-term partnership with TwentyFour.
TwentyFour portfolio manager Douglas Charleston commented that TML has an experienced team behind it, but without the legacy issues that some lenders carry.
“To have completed a forward flow partnership transaction gives UKML and corporate funding a growth engine to evolve with markets, design new products within the investment policy and importantly be more opportunistic when considering future investments,” he stated.
At the start of February, Mr Pothecary announced plans for The Mortgage Lender, with a board including chief financial officer David Newman, chief operating officer Hugh Meechan, and former Mortgages PLC operations director Pete Thomson as sales and marketing director.
Mr Pothecary’s previous venture, Mortgages PLC, was founded in 1997 and went on to securitise more than £7bn of mortgages in the specialist lending market.
Eventually it was sold to Japanese-financed Majestic Acquisitions in January 2002, which then sold its stake to Merrill Lynch in November 2004. After the financial crisis, the investment bank stopped its UK lending due to market conditions.
Mr Pothecary tried to buy Mortgage PLC back from Bank of America Merrill Lynch, but after failing, he reunited with some of his former team and in 2014 started working on plans for a new lender.