Conduits not needed

Westpac is proving to be an important friend to the surviving firms that built their home loan business - either as funders or distributors - on the flow of money marshalled from the capital market in the 1990s and 2000s under the technology of securitisation.

Not only has Westpac allowed lenders to improve their margins on home loans by the bank's controversial pricing stand last week, but the bank is also helping show other funders that there is an investor market for mortgage-backed securities.

While most if not all of the "conduits" that bought RMBS with long-term RMBS and funded them in the asset-backed short-term market are closed or dormant, there appear to be real money investors around for Australian mortgage pools, including plenty of European names (often banks) that have not been seen in the market for some years.

Bendigo and Adelaide Bank sold half or more of its recent RMBS transaction to investors offshore. A significant minority of offshore investors also bought in to the recent FirstMac bond.

Funders such as FirstMac are also taking the time to help improve the quality of the story they can sell to investors.

One marker of this is the upgrade in the "servicer evaluation" by Standard & Poor's, announced yesterday.

The quality of the servicer, or banking platform, is tied up with the quality of the cash flows attributed to a pool of home loans, including management of the arrears (and in which FirstMac is now reporting levels below industry averages).