Half of securitised mortgages backed by non-conforming loans

Mortgage originators have raised approximately $1 billion in securitisations since November last year, with around half backed by non-conforming mortgages, according to the Reserve Bank of Australia.

In its statement on monetary policy for February, the RBA noted that non-conforming loans typically involve borrowers with a history of credit impairment, higher loan-to-valuation ratios or less income documentation.

Australian securitised issuance reached $35 billion in 2014, an increase of $2 billion from 2013 and the highest level since 2007, according to the RBA.

“Around $9 billion in securitisations have been issued since the previous statement (November 2014), with around 80 per cent in the form of residential mortgage-backed securities (RMBS),” it said.

“One major bank issued a $2.5 billion RMBS, while smaller banks accounted for about $3 billion of RMBS issuance.”

Two securitisations backed by assets other than residential mortgages (mainly vehicle and equipment leases), have also been issued, raising a total of $1.5 billion; issuance of such securities has remained low in 2014, according to the RBA.

“Issuance spreads on senior RMBS tranches have been little changed over 2014, remaining at their lowest levels since late 2007, but still well above their pre-crisis levels,” the statement said.

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