Firstmac completes RMBS issue backed by low-deposit home loans and SMSFs

by Micah Avry Guiao18 Aug 2021

Firstmac has completed a residential mortgage-back securities (RMBS) issue backed by low-deposit home loans and self-managed superannuation funds (SMSFs).

The issue, which is the first of a new series called “Firstmac Eagle No. 1,” was launched at $300 million and upsized to $650 million, which the non-bank said was in response to strong investor demand.

In a first for Firstmac, the issue will fund residential loans to SMSFs, as well as fund loans for borrowers with deposits of 10 to 20% – typically first homebuyers, for whom Firstmac has waived its traditional requirement to take out lender’s mortgage insurance (LMI). 

Kim Cannon, managing director at Firstmac, said that the success of the RMBS issue allows it to continue lending to low-deposit borrowers without charging LMI. Instead, they can underwrite these loans with its own lenders risk fee (LRF)—the low-cost alternative for borrowers.

Under the Firstmac LRF policy, borrowers with an 80 to 90% loan-to-value ratio (LVR) can borrow up to $750,000 without buying LMI from a third-party insurer.

In the case of a $600,00 loan, the LRF ends up $6,700 cheaper than LMI.

“LMI adds up to many thousands of dollars and has caused many first homebuyers to delay getting their foot on the homeownership ladder, often to their long-term financial detriment,” Cannon said. “We are thrilled that we have been able to clear away that obstacle for them and had the resulting RMBS favorably received by investors, making the policy sustainable for the long-term.”