Non-conforming RMBS deals have played a greater role in the Australian securitisation market over the past year with some recent issues larger than any subprime deal since 2007.
Speaking at the Australian Securitisation Conference in Sydney yesterday, Reserve Bank head of domestic markets department, Chris Aylmer, noted significant changes in the domestic securitisation market, with less involvement of the major banks and an increased share of non-conforming mortgages.
RBA data shows that the Australian securitisation market has been shrinking since its post-GFC peak in 2014. Total securitised issuance – including RMBS, CMBS and other ABS – is now at approximately the same level as 2012.
“The stock of marketed securitisations outstanding is a little above $100 billion, compared with a peak of about $250 billion in 2007,” Mr Aylmer said.
“The decline in RMBS issuance this year has been driven by a significant reduction in issuance by banks,” he said.
“This reflects, among other things, less favourable conditions than in the senior unsecured wholesale debt market where banks have been able to issue in size and for longer maturities. The treatment of encumbered assets in the net-stable funding ratio also favours the issuance of senior unsecured debt over RMBS.”
However, while total issuance has almost halved since 2012, the share of deals has swung towards the non-bank lenders.
Mr Aylmer highlighted that over the past year non-conforming RMBS, which are mainly issued by non-bank mortgage originators, have accounted for about a quarter of total RMBS issuance, compared to a post-crisis average of around 5 per cent.
“Non-conforming RMBS have also become larger, with some recent issues being between $700 and $800 million – larger than any other non-conforming deal since 2007,” he said.
Last month Pepper priced an $800 million non-conforming RMBS deal, the largest in the domestic market since 2006. The issue was the largest in Pepper’s history.