White-label lenders look to NAB

If NAB aims to address its underweight position in the mortgage market by buying the competing business from Challenger, it will be the white-label division and not the mortgage broking arm that the bank will have to fire up.

NAB is buying $4 billion in home loans from Challenger, equal to about 0.4 per cent of the aggregate home loan market. NAB is in effect cleaning out the warehouses (provided by a range of banks) that support Challenger's dormant securitisation program.

Challenger and NAB are claiming there are 400 clients of this white-label business, most of whom NAB would never have heard of before the due diligence.

The bulk of Challenger's new business would come from a handful of clients (of which Resi Home Loans is the most active advertiser and the largest originator in this group).

This client group have all had to operate on constrained funding lines from Challenger, and watch in frustration as major banks (but primarily Commonwealth and Westpac) gallop away with the new business flow generated over the last 10 months by the increased government grants to first home buyers.

Other major banks largely left white-label funding to non-bank entities during the long credit boom.

ANZ still has a white-label business in Origin (which iut tried to sell and reduced in scale after faiiing to do so). Commonwealth Bank had a few clients.

NAB is unlikely to generate much in the way of interest earning assets merely by owning a range of aggregators that in turn assist mortgage brokers do their work. In reality all NAB will do is control some of the value chain in the origination of home loans for its rivals.