Heartland secures funding for reverse mortgage business

ASX-listed financial services group Heartland Group Holdings Ltd (Heartland) has announced the completion of a long-term $142-million Australian securitisation transaction through its Australian subsidiary, Heartland Seniors Finance.

Funded by offshore institutional investors, the reverse mortgage-backed syndicated loan securitisation (said to be the first of its kind), will provide Heartland with funding with a 30-year final maturity.

It will also increase its access to committed Australian reverse mortgage loan funding to $1 billion in aggregate to support growth and demand for the product.

The financial services provider had stated earlier this year that it will increase marketing activity to drive up leads for its Australian small-business arm throughout the second half of the 2020 financial year.

It had also stated that it would continue focusing on further diversification of funding programs in its Australian business over the rest of the financial year to support business growth.

The latest transaction will assist Heartland with its strategy to diversify type, source and tenor of its Australian funding, while demonstrating market liquidity to existing warehouse funders, Heartland said in its announcement to the ASX.

“The financing structure matches Heartland’s reverse mortgage assets with the Solvency II requirements of European insurers and provides Heartland access to deep pools of efficient, long-dated funding that is typically unavailable to most Australian non-bank financial institutions,” Heartland said.

Its reverse mortgage asset portfolio has enabled the structure to achieve leverage of 98 per cent, it added.

Macquarie Bank’s structured lending team arranged the transaction, which was supported by several offshore institutions, including UK-based investment manager M&G Investment Management Ltd.  

“Australian retirees are estimated to own around $1.5 trillion in home equity – by far their largest pool of wealth in retirement,” Heartland said.

“Accessing a global base of offshore investors will assist Heartland to continue to enable thousands of Australian retirees to unlock this wealth while continuing to live in their own home.”

Heartland holds a market share of approximately 26 per cent in the Australian reverse mortgage landscape.

According to its half-year results, its net operating income had increased by 42 per cent in its Australian business to $16.6 million.

The earnings bump was driven by a sharp spike in the uptake of its reverse mortgage products, with the portfolio rising by $79 million to $887 million, representing annualised growth of 20 per cent in the first half of the 2020 financial year.

[Related: Heartland announces changes to the board]