Delta Lloyds' latest Dutch residential mortgage securitization has an innovative work-around to regulations that make it unattractive to use swaps to hedge interest rate mismatch.

The €770 million deal, Arena NHG 2014-I, is backed predominantly by prime, fixed-rate residential mortgages, but will issue fixed-rate notes. In the past, such deals have relied on interest rate swaps to offset the interest rate differential between the floating-rate notes and the predominantly fixed-rate mortgage loans. But a number of regulations have made it unattractive for banks to provide such arrangements.

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