ME Bank’s controversial attempt in April to limit redraws across its mortgage book not only backfired from a customer relations perspective, but it appears to have induced a surge in the activity it aimed to curb.
The latest monthly reports to investors holding mortgage backed securities(MBS) issued by the bank indicates that ME borrowers flooded the bank with redraw requests during the public backlash against the restrictions in early May.
Investor reports for securitised home loans on five MBS programs reveal an unprecedented frenzy of redraw activity occurred at the bank as borrowers seized opportunities to redraw on their mortgages.
ME tried to rein in the redraw facilities on home loans written up to 2015 under the controversial restrictions that took effect on 27 April, but the public controversy over the measures also triggered sharp increases in redraw requests on mortgages not affected by the restriction.
Investor reports for the five MBS programs - covering 2013, 2014, 2016, 2017 and 2019 - show that redraw advances increased by A$112 million in the 30 day periods stretching from April into May.
This number reflects an extraordinary development because the aggregate amount of redraw advances reported for the same five securitised mortgage pools in the previous month was only $18.8 million.
The increase represents a sixfold increase in redraws advanced across these securitised portfolios.
The full level of redraw activity on the securitised bank’s mortgage book will not be known until next week when investment reports for other MBS programs are released by the bank.
While the heightened redraw activity was a standout feature of the performance of ME’s securitised mortgages in the latest reporting period, its cashflow impact was eclipsed by other borrowers who accelerated prepayments on their loans.
ME last night declined to comment on any of the details relating to the redraw activity reported to investors, but a spokesperson observed the following in an emailed statement: “We’re seeing no material difference in overall cashflows from the securitisation pools on a monthly basis.”