Adelaide Bank have taken an unusual dose of additional insurance on a proposed $800 million securitisation of low doc loans, in a structure that features primary mortgage insurance, pool mortgage insurance and a financial guarantee from monoline insurer Ambac. The "wrap" from Ambac presumably distances the Torrens Trust Series 2004-2 loan pool from an already remote prospect of a credit rating downgrade for the bond, which in a conventional mortgage securitisation would arise from a series of downgrade for one of the mortgage insurance companies.Adelaide Bank's copied the route pioneered by Australian Mortgage Securities and Cuscal), and separated low doc loans from fully documented home loans for the purpose of securitisation. The rationale is that excluding low doc loans from a prime securitisation will cut the overall funding cost compared with mixed pools of prime and low doc loans.Adelaide may reason that the cost of the additional insurance from Ambac on the low doc pool offsets the additional spread that the bank will have to pay investors to compensate for the perceived additional risk of low doc loans.Adelaide, however, in the past has argued that there are no additional risks in low doc lending, and the bank appeared to maintain that line yesterday.In the media release in relation to the announcement of the low doc loan pool, the bank's chief general manager of operations, Jamie McPhee, said that in the more than three years since Adelaide Bank introduced low doc loans, "We have found that the low doc loan portfolio has performed extremely well, with arrears in line with industry expectations and zero [mortgage insurance] claims."That statement doesn't amplify what "industry expectations" are. Meanwhile, the bank said in the same press release that mortgage loan approvals increased 59 per cent in the 10 months to April 2004.The bank said it was "on track to achieve its target of an increase in total loans under management for the full year of well in excess of 15 per cent."