Non-banks feast amid RMBS frenzy
Bond-starved credit investors face a smorgasbord of mortgage-backed bonds to choose from this week, with almost every prominent non-bank funder working out terms to borrow from debt investors.It's a timely series of refinancings for a sector linked (fairly or not) to the recent revival in residential investment lending in Australia, filling any void created by banks subject to APRA caps on lending growth.La Trobe Financial, Liberty Financial and FirstMac are three non-banks that either have, or will, this week finalise pricing of mortgage-backed securities. Resimac and Pepper may also soon follow.Jonathan Rochford, portfolio manager at Narrow Road Capital, said "now was a good time for any irregular issuer or new issuer," citing the parallel marketing by Latitude Finance Australia for a A$3.8 billion pool of credit card receivables, a debut for the financier."Conditions are good for non-banks to sell multi-million dollar chunks of RMBS. If you sell, you can lend and you can fill up your [bank funded] warehouse," Rochford said."In the secondary market, there's been quite a bit of [RMBS] trading and pricing coming in (this year)," he said.?FirstMac, the funder behind mortgage market price leaders loans.com.au is keeping pricing on six tranches of bonds, for $1.7 billion in aggregate, sold through Firstmac Mortgage Funding Trust No.4, in the shadows.La Trobe is making its fourth venture into the debt capital market via the La Trobe Financial Capital Markets Trust 2017-1.Liberty Financial is seeking to sell $500 million in RMBS via Liberty Series 2017-1 Trust.Moody's Investors Service in a pre-sale report on the Liberty bonds said that "the portfolio has a relatively high weighted average scheduled to valuation ratio of 73.7 per cent," while "36.4 per cent of the loans have a scheduled LVR above 80 per cent and 21.7 per cent have a scheduled LVR above 90 per cent."The La Trobe RMBS, by contrast, features no loans with LVRs of more than 90 per cent, though 15 per cent of loans are in the 80 per cent to 90 per cent LVR band.James Austin, chief financial officer at FirstMac, said its bumper RMBS, the largest yet by any non-bank, "allows us to really boost our retail home loan offering.""The origination volumes of the non-banks are very healthy currently. This is not a simplistic as straight investor flow but it is no doubt related in some way to the regulators slowing down ADI lending."Austin added that "the investor component of this transaction is 35 per cent of the pool, which is roughly equivalent to that written by the banks as shown in APRA ADI quarterly lending statistics."