Aggregator raises $300m in RMBS funding

Non-bank lenders are increasingly relying on the residential mortgage-backed securities market for funding, with an aggregator and lender both raising $300 million yesterday



Non-majors and aggregators are increasingly relying on the residential mortgage-backed securities market for funding, with $1.1 billion of new deals made this week.

Mortgage aggregator AFG announced the successful pricing of its third RMBS transaction yesterday, raising $300 million of funding for its origination business AFG Home Loans from domestic and offshore investors.

The company, which has 11.4% of Australia’s total mortgage market, entered the RMBS market in March last year, when it raised $275 million.

“This is a great result for AFG,” said general manager Cameron Smith. “We’re enjoying the ongoing commitment of our 2013 investors and the introduction of several new investors to AFG. This led to the deal achieving a solid pricing outcome.”

The $300 million pool of home loans was originated through the AFG broker network, of which there are 1,950 members processing an average of $3.5 billion in home loans each month.

Liberty Financial also raised $300 million through an RMBS issue that priced yesterday. The lender issued securities in the RMBS market twice last year, raising $200 million in March and $500 million in April.

Australia's bond market is likely to take more lending business away from banks as tighter banking regulations make market-based finance relatively cheaper, Reserve Bank of Australia assistant governor Guy Debelle told the Economic Society of Australia yesterday.

"While bank-based finance remains dominant today, in the future we may well see the Australian financial system move to more market-based sources of finance, particularly bonds.”

The continual improvement in broad market sentiment has been seen strongly in the Australian asset-backed market, particularly in the market for RMBS. The volume of issuance of RMBS in 2013 was the highest since 2007, he said.

"Foreign investor demand for Australian RMBS has been quite high, reflecting the lack of supply of RMBS in foreign markets, the global search for yield, and confidence in the high quality of the underlying collateral of Australian RMBS.”

Primary issuers include Pepper, Firstmac, Resimac, Liberty, Columbus Capital, AFG and Heritage Bank.


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