Firstmac has completed the largest RMBS issue from a lender of its type, a strategic transaction that its chief financial officer says will enable it to be significantly more competitive in the home loans space.
The lender announced this week that it has completed a $1.7 billion RMBS transaction with an overseas bank.
The new funding source is expected to provide Firstmac with ongoing support for RMBS issues, and according to founder Kim Cannon has “solved the funding challenge” for the lender.
Mr Cannon said the new funding source would end the brakes-on/brakes-off lending cycle that Firstmac had adopted in recent years due to periodic funding constraints.
Speaking to Mortgage Business, chief financial officer James Austin added that the transaction is a strategic one that Firstmac has been working on for six months.
“It's over and above our normal RMBS funding programs, so it frees up all of our warehouse capacity and allows us to really get out there and be very aggressive for new home loan lending,” he said.
“Over the past 12 months, we have been less competitive due to the lack of funding capacity. We’d certainly been operating in the markets but during 2014 and 2015, we were settling 1 per cent of all home loans in Australia.
“We had quite a backlog of settlements that we needed to clear through the RMBS markets, and while we continued to lend through 2016, we couldn't lend with the same aggressiveness that we had back in 2014 and 2015.”
Mr Austin said that completing this RMBS transaction allows Firstmac to now really sharpen the pencil in its offering.
Further, he explained that the transaction is a direct outcome of the corporate process to sell Firstmac last year.
“The corporate process was largely around solving the funding issue,” Mr Austin explained. “The existing RMBS program, which was largely domestic investors, was probably catering for perhaps about half of our funding needs.
“The reason we went into that corporate process was to look for a bigger borrower, a big balance sheet that could give us that incremental funding, or other funding solutions.
“So, this $1.7 billion is the outcome of that corporate process,” he said.
Looking to the future, Mr Austin told Mortgage Business that Firstmac is looking to ramp up its mortgage lending throughout the rest of the year.
“We currently have a balance sheet of $8 billion. We’re aiming to increase that balance sheet to $10 billion by Christmas, and that really entails us achieving that goal of growing beyond 1 per cent of market share in Australia.”
[Related: Non-bank prices $145m RMBS re-issue]