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When it acquired Resi Mortgage Corporation nine years ago for $36 million, Yellow Brick Road had big plans to integrate product manufacturing with an extensive distribution network. Buying aggregator Vow Financial at the same time for $17 million was an integral part of the strategy.
But it took the COVID-19 pandemic for the group to be tested under pressure and ultimately forge a new Resi product suite based on changing borrower needs.
“People fit into a whole lot of different categories,” Mr Bouris told Mortgage Business. “Once upon a time, there was prime and subprime, or near-prime,” he said.
“We have had to change our products and the way we assess people’s ability to service a loan based on different styles of work. It is about creating products to suit a different type of borrower.”
Resi’s settlements for the six months to 31 December 2022 were approximately $300 million, building on the $428 million in settlements over the year to 31 June 2022.
Mr Bouris describes the growth of Resi as a “complex algorithm” with many different working parts.
“You need a good mezzanine funder who understands the products. Then you need to build a team who can execute on credit solution,” he said.
“You have to get your distribution on board. There are lots of stops and starts. Sometimes you need to re-educate brokers on the product or win them back. Not every deal goes smoothly, so you need to go back and review those deals.
“It has been a massive learning curve in terms of credit appetite, what borrowers want in terms of product style and also what funders want. We have had to build a whole new ecosystem. It has taken a lot of patience and there have been a lot of disappointments. But now we are pretty much there.”
Earlier this month, YBR announced that Resi’s senior facility had been extended by another 12 months (to 21 February 2024) with the limit increased by an additional $100 million. This brings its total size to $550 million.
In addition, the group has also secured a new mezzanine finance partner for its Resi Warehouse.
Sandhurst Trustees Limited (Sandhurst) has agreed to provide another $49 million in senior mezzanine funding for the Resi Warehouse. The wealth manager — which is a wholly owned subsidiary of Bendigo and Adelaide Bank Limited — is the responsible entity for each of the Sandhurst Select 90 Fund and the Sandhurst Investment Term Fund.
Given the expanded funding, the Resi Warehouse now has a funding capacity of $611 million.
[Related: Broking industry ramps up payroll tax action]