How securitisation is helping advisers write better loans

Non-traditional funding method is helping the third party to pass confidence on to clients

How securitisation is helping advisers write better loans

Non-bank lender Resimac is making a strong play for the third-party channel by embracing the securitisation model that has seen its Australian counterpart go from strength to strength.

New Zealand non-banks have been growing in market share and are popular with the adviser sector: though they currently take up around 1% of the mortgage market, in Australia, they are closer to 10%.

Resimac has operated on a securitisation model, where it goes to the market for funding, and has enjoyed a bumper year: in March, it priced its largest deal since the GFC for a total of AU$1.5 billion.

“A lot of the non-bank community now are funded through various different means, not just the historic debenture or deposit taker model,” explained Luke Jackson (pictured), NZ lead for Resimac.

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“You’ll find a lot of the non-bank growth in recent years has been through securitisation, which is basically the selling of large pools of different asset classes to institutional investors.

“It’s funded by institutional style investors as opposed to Mom and Dad. That’s how Resimac New Zealand is funded and it’s how quite a few other banks fund themselves. Definitely, the growing ones are using that model.

“That provides us opportunity to ensure our rates are at a pretty competitive level against banks, which has benefit for the borrower, and also provides a robust funding model that can enable us to provide longer term mortgage options for borrowers.”

Resimac Australia is ahead of New Zealand in this area, but NZ is catching up. “Australia has a far more mature securitisation market, that is for certain,” said Jackson.

“What’s exciting about here is the increasing number of non-banks using securitisation, as we’re starting to see a real maturity develop in New Zealand, which is what we’re looking for.

“As more institutional investors get comfortable with the product and understand it, there’s real opportunity, and the benefit flows down to borrowers because the structures are efficient and the borrower gets competitive pricing.”

How Resimac’s non-bank securitisation model helps advisers

For advisers, there is plenty of advantage in operating in a market based around securitisation, as it can provide a greater security of decisioning from lenders.

“We’re definitely writing to a standard that that can be securitized, obviously,” said Jackson. “What it also does is provide a bit more surety of funding.

“We’re not so reliant on an investment advertising campaign to attract Mom and Dad investments, which is which is traditionally what the old debenture-style runs as.

“The other thing is that institutional investors know exactly what they are purchasing when they’re buying our stock. I appreciate there’s been a heap of education, regulation and policy put around deposit takers and educating their investors into exactly what they are buying, which is extremely important.

“With us, we have the comfort of knowing that institutional investors, when they’re buying our stock, they are well educated on what they’re buying.”