La Trobe enters the RMBS market

Mortgage lender La Trobe Financial completed its first securitisation deal on Friday, when it priced a A$102 million issue of residential mortgage-backed securities. A single domestic investor purchased the $87.7 million top tranche and pricing was not disclosed.

La Trobe's head of debt capital markets, Ryan Harkness, said that if this issue (La Trobe Financial Capital Markets Trust 2014-1) goes well the company will consider regular RMBS issuance as part of its funding strategy.

La Trobe is better known as a mortgage fund manager, holding its loan assets in a range of retail and institutional managed funds. In the past 10 years it has originated more than $10 billion of mortgages.

Founded in 1952, the company specialises in providing residential and commercial property loans to borrowers who fall outside the lending criteria of traditional bank and prime non-bank lenders. Such borrowers include the self-employed and people who have a history of credit impairment.

According to the Standard & Poor's presale reports issued last week,
23.8 per cent of the loans in the RMBS portfolio are to borrowers with unfavourable credit histories.

Self-employed borrowers account for 50.5 per cent of the loans in the portfolio.

Full income verification has not been carried out for about 43.2 per cent of the loans in the portfolio (that is, they are low-doc loans). S&P said La Trobe undertakes a range of checks to determine the reasonableness of a borrower's declared income.

The pool has a 38.9 per cent exposure to loans secured by properties in non-metropolitan areas.

The delinquency rate for La Trobe's residential mortgage loans from 2006 to the beginning of 2013 has tracked below industry averages, as measured by S&P's performance index for sub-prime mortgages.

However, the index has fallen over the past year and La Trobe's arrears level has risen marginally above the industry average.

In other news in the mortgage-backed sector, the Australian Office of Financial Management continued the sell-off of its prime RMBS portfolio.

With this latest sale of AB class notes AOFM has all but exited its holdings in this category.

AOFM sold its holdings of Challenger 2009-1, Liberty 2010-1, FirstMac 2-2011 and FirstMac 1-2012 class AB notes, with a total amortised face value of A$49.2 million.

AOFM also advised that its holding of Firstmac 2008-2 Class AB notes will be called by the issuer next month. This will take AOFM's holdings of AB class notes to zero.