Australian affordable-housing lender taps U.S. RMBS market
An Australian nonbank institution tied to a state-run affordable housing program will issue part of a new domestic RMBS transaction in U.S. dollars, according to a presale report from Fitch Ratings.
RESIMAC Bastille Trust RESIMAC Series 2019-1NC is an Australian-dollar (AUD) $1 billion transaction (approximately US$674.5 million) that will feature a US$250 million Class A-1 tranche of notes, the report stated. The U.S.-dollar notes will be on a more accelerated amortization schedule than the rest of the tranches.
The senior U.S-dollar notes and a companion AUD$419.7 million tranche have preliminary AAA ratings from Fitch, and will be priced to one-month U.S.-dollar Libor. The senior notes benefit from 21% subordination of eight classes of unrated junior notes.
The RESIMAC Bastille Trust has previously sponsored dual-currency securitizations, the previous deal issued in August 2018 with a larger US$393.75 million portion of notes in another AUD$1 billion offering.
That deal was rated by Moody’s Investors Service. A previous Fitch-rated RESIMAC deal from 2017 was issued only in Australian-dollar denominated bonds.
The notes are backed by a pool of more than 2,000 mortgages with an average balance of AUD$486,381 (US$328.3 million) and includes both conforming (60.6%) and nonconforming (39.4%) Australian residential mortgage loans originated by RESIMAC.
The notes are being issued through the master-trust structure of the RESIMAC Bastille shelf. The loans in the new pool are predominantly for self-employed borrowers (85.8%), with 32.4% being used for investor-owned properties, and are seasoned an average of 23 months.
According to Fitch, only 17.5% of the loans are considered full-documentation loans under Australian regulations (the remainder being classified as alternative or “low-doc" loans). In a 2018 report, Moody’s stated alternative-document and low-documentation loans typically are underwritten with limited income history (three to six months) and the floating-rate loans will carry higher interest rates ranging from an added 50 to 150 basis points than standard-documentation loans.
Of the loans in the pool, 12.5% of the pool balance comes from loans to borrowers with impaired credit.
According to Fitch, RESIMAC is a 34-year-old institution based in Sydney that has operated the HomeFund affordable housing program of New South Wales since 1985. RESIMAC managed the program under the name of FANMAC Ltd., which originated HomeFund loans that supports home-loan underwriting for previous public-housing tenants.
FANMAC was also Australia’s first issuer of residential mortgage-backed securities, and has issued AUD$28 billion of securities since 1998, according to Fitch.